Emotions Gone Wild
Using Pivots to See Common Chart Points
Finding Great Range Entries of Pivots
There’s a common belief that most market moves are the result of two emotions, greed and fear. However, it may be appropriate to look at greed as another side to the same coin of fear because greed is often acted on in the fear of missing out of a ripe trade. Naturally, emotionally entries are rarely good entries and we’ll take a look at using pivots to keep your emotional reaction out of trading so that you can objectively find good entries on the emotional extremes of others.
Emotions Gone Wild
Recently, a very important question was asked. The question could be
boiled down to, why do low balance traders consistently underperform
high-balance traders across the board? The answer is important for
traders of all balances.
The answer summed up is that traders with a low balance are more likely
to need the money in their account for other expenses and thus are more
likely to act on fear. The antithesis is the high balance accounts that
have a specific advantage over the little balanced traders. In one
phrase, they do no need the money or the markets and can therefore, act
with little or no emotion. Put another way, traders who don’t need the
market are “Fearless.”
Using Pivots to See Common Technical Extremes
Without pivots, it’s easy to chase price. If you’re not familiar with the concept of chasing price, it is akin to entering on an extended move. However, a similar flaw that many traders come up against is fading a strong trend. These seem like opposing forces and therefore, at least one of these groups of traders should overall be successful. However, if traders are emotionally guided, they will continue to enter and exit on excitement, which can be fatal to growing an account balance.
This morning saw one of the more aggressive USD selling routs of 2014. While there are a handful of explanations to the selling, the emotional pull to chase price and sell on an extended move warrants caution. As you can see above, the weekly pivot S2 level was hit on Monday morning of the week of June 30th. This means an extended move opening the week and chasing that price could prove costly when you consider recent extreme moves in relation to weekly pivots.
Finding Great Range Entries of Pivots
One way to be methodical is to wait for a favorable entry that aligns with a technical convergence through pivots and or other levels. Only then, you can take a low risk: high reward trade that over time can help you trade your way toward your trading goals.
Over time, waiting for set-ups like these to unfold can help the market come to you as opposed to you chasing the market.
Happy Trading!