I'd like to talk about market dynamics with the gold market today. This was a very difficult video to produce because I just didn't have enough time to talk sufficiently and without making some mistakes. One point that I did not articulate well is that if you become a seller and the market works against you, then you become a buyer so you are not only feeding the market price action as a seller, but you will feed the market again when you buy the closure short position and this is important because when markets expand the way that I described here buyers and sellers are feeding the market in both directions, and when they trade to their exit when they are losing is feeding the market in the opposite direction that they intended. So when you see big swings in the market going higher it's not just because buyers are stepping in to open, but there are sellers who are buying to close.
One other point: FX entered his trade on a 135 pattern to go long, but when the market broke to a new high and then corrected to the 618 level, it created another 135 pattern to go long. what I said about taking a long trade at that point was based on the volatility of the swings and that if you could locate the entry at the 618 level, there could be an argument to take a long trade there up to the breakout when it went lower and this would represent seven or $800 without too much difficulty. What that means is that your initial draw down of $1800 on your first position comes to the 618, if you can add a contract by scaling into the market, and if you thought the market could trade seven or $800 higher you could actually exit 1 contract, or maybe both contracts to reduce that draw down from the high to couple hundred dollars of today's high.
I am not recommending to anyone to scale in and out of the market or to scale into the market to add to a losing position, but very good traders can do this because they understand market dynamics, and the markets will show you these patterns happening if you're aware of them and this is another way of being aware of how the market trades alternatively in the favor of buyers and sellers if you were always considering both sides of the market. ( sorry for any typos )
One other point: FX entered his trade on a 135 pattern to go long, but when the market broke to a new high and then corrected to the 618 level, it created another 135 pattern to go long. what I said about taking a long trade at that point was based on the volatility of the swings and that if you could locate the entry at the 618 level, there could be an argument to take a long trade there up to the breakout when it went lower and this would represent seven or $800 without too much difficulty. What that means is that your initial draw down of $1800 on your first position comes to the 618, if you can add a contract by scaling into the market, and if you thought the market could trade seven or $800 higher you could actually exit 1 contract, or maybe both contracts to reduce that draw down from the high to couple hundred dollars of today's high.
I am not recommending to anyone to scale in and out of the market or to scale into the market to add to a losing position, but very good traders can do this because they understand market dynamics, and the markets will show you these patterns happening if you're aware of them and this is another way of being aware of how the market trades alternatively in the favor of buyers and sellers if you were always considering both sides of the market. ( sorry for any typos )