Market Correction or going to Crash?
For Dow to drop more than 1,000 points twice within a week is a rare opportunity, but something which every trader should witness and learn, in the course of their journey as a trader.
(I’m writing this on Fri evening before US markets close, so if Dow drops another thousand points tonight, it would be the third time this week)
This shall be a benchmark for you to check your own emotions, to gain some invaluable experience, so that you can benefit (tremendously) the next time this happen again (will definitely happen again)
In the papers, “experts” are suggesting 2 contrasting views (as always) One which suggests this being a necessary “healthy” correction, remain calm.
The other warns of “larger correction”
As expected, some students asked me what I think Those who know me well enough (as a teacher/trader) would know that I won’t answer this question.
I don’t have an answer.
I am a trader, not an analyst, not a forecaster. A trader trades by following a set of procedures, and that’s what I teach my students to do.
So, what’s my answer to that question ?
I shall start by repeating this: Let’s learn from history. To be a good T.A. trader, you MUST believe in this:
- Human emotions created price movements in the market - These emotions are manifested in the chart (as Price Action) - Human behavior will NEVER change, so it will be repeated - When we understand this, we can benefit in monetary terms Do you TOTALLY agree with these beliefs ?
Let's zoom in ... ( this portion is before Dow crash through 200 subsequently ) Look at this chart pattern formation, prior to the crash during 1929 (the worst crash in America history, leading to an economic depression). I will show you similar pattern appearing, currently in several markets, later. *** something which I just introduced, called 3MP Now, however, I’m NOT suggesting that market would crash. What does it depend on?
Ans: It depends on whether “THAT LINE” can hold the market. If it can hold, then this down move would be a correction for the entire up move since Nov-2016 (the Trump effect).
If it cannot hold, then you better RESPECT “the forces of market panic”.
Now let’s plant in “that line” (IN GREEN)
*** I expect you to know how to, because I taught you during my course When “that line” is identified, then it becomes simple.
The SOP is to REMEMBER the 4 ways a market can react to a S/R level (which I started teaching in part 1 course, and continue to enforce throughout subsequent courses/sessions). You do NOT need to know if that line can hold, or will break. However, some of you might have a view, or bias, as to whether we are still in a bull run, or the bears are making a come back. Despite whether you have a view/bias or not, you need to FOLLOW PROCEDURE! Remember this saying: Trade what you SEE and NOT what you think. Of course you can think, but it MUST be CONFIRMED by what you SEE.
Among my usual 10 markets analysis, I will show you the 2 “strongest markets”, which are very “far away” from “that line”.
Next will be the 4 markets we trade in our live trading classes, that the current fight is AT THAT LINE, for all of them.
I will also show you DAX, to see how a sample European market fair.
Additional consideration, look at Y.E.C. together with 200 Exponential Moving Average, I expect you to know what that means.
There’s also the Chandelier Analysis (which I won’t elaborate here) Your job as a trader, FOLLOW SOP: plan DEEP !!!
Now, can you appreciate “the power of not needing to know”?
In fact, you will definitely end up "in doubts", if you are always trying "to know". Your job as a trader, FOLLOW SOP: plan DEEP !!!
==> money follows
***I'm repeating, because it's IMPORTANT !
By following procedure, even if you’re wrong, your damage would be limited. When you’re right, you're contributing to the routine growth of your account ! Isn't that POWERFUL !?
A gentle reminder of how the market really works, and how YOU must function as a trader, in order to do it professionally, and get rewarded.
This article should offer you the compass to seek direction in the market jungle.
Just don’t miss the forest for the tree !!!