Day Trading Tips and Tricks

March 19, 2019

Erich Senft

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What does a Happy Active Trading Market Look Like?

Do you know what a Happy Market looks like?

Most traders assume that a happy, active trading market looks like this:

not an active trading market

But you would be wrong!

A happy, active trading market looks like this:

the best kind of active trading market

Now, notice I said the market was Happy, not you. The second chart is one that shows extreme chop, lots of whipsaws and is one that is sure to make most traders decisively unhappy, but this is a graphically exact representation of how a “happy” active trading market looks.

Why is this?  It’s because the market is content. Price is neither going up, nor down, and is happy to remain within a relatively small trading range.

So, What Makes a Market “Happy”?

Remember that price only moves when there is an imbalance between buyers and sellers. No imbalance, no movement. If the buyers and sellers are evenly matched, the price will go nowhere. This condition is precisely why markets tend only to trend about 20% of the time. The rest of the time they are mostly content with their pricing and happy to remain there. The only thing that can make a market unhappy (out of balance) is if something comes along to disrupt the tension between buyers and sellers. Such a disruption will once again give you an active trading market.

What Should You Do?

So what does this mean for you as a trader? Well, for starters, discipline yourself to wait for the market to tip its hand and show you it is getting Unhappy, out of balance, and ready to once again become an active trading market before you take a trade. I see traders all the time trying to “read” something into a chart that isn’t there. Don’t talk yourself into a bad trade. It takes some “chart time“, but eventually, you must learn to recognize when you have an active trading market. Then, the trick is to accept it and not fight it!

Trading a Happy Market

Allow price to breakout of its trading range and show you the imbalance – and who controls the market – and then trade with the controlling group. If the market is moving from a state of balance to imbalance chances are pretty good it will take a while to find its balance again. It is this period of imbalance, or market “unhappiness” when it is easiest for us traders to make our profit.

And that can make us very Happy. 😉

Happy market or not, come join us in our Trade Room.  Click HERE to Register.

March 19, 2019

Erich Senft

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