The Daily Market Forecast... confluence

Today’s Lesson: Power in confluence.

You have a trade plan with specific rules of entry and exit that produce a positive expectation (if not, get one or quit trading). If EVERY trader used the same plan and followed it precisely there would be no one to trade against.

You WANT and NEED traders to do something different than you. This is a good thing. Now if you want to step up your performance you’ll learn OTHER popular trading strategies. Not necessarily to trade them, but to consider what OTHERS may be doing at the same time.

Here's a simple example: the 20-period moving average is a popular technical indicator. You may not use it because it is a lagging indicator or you haven’t been taught HOW to make it work. Regardless, there are traders who use it. Put it on your chart.

Why? Because if your strategy is getting a signal to enter around there you might be finding some confluence (with other trade plans). If you’re short in the trade and wondering about a good profit target, approaching that indicator, where others might be buying, would be a fine exit.

I’m not suggesting you clutter up your charts with every indicator or trendline or fib, etc. I’m suggesting that KNOWING how others trade these and considering their potential effect on your plan could be helpful.

Tesla’s parabolic move up recently is offering a real-life example. TSLA was up 9.65% yesterday and 51.88% in the past 5 weeks. Wow. You might expect to hear those numbers from a meme stock but an $800 stock? The close yesterday was the second day it closed above 3 standard deviations from its mean. There are traders who fade that move. The math has some edge. Today’s premarket is showing TSLA -4.5%. Taking profit near the close yesterday would have been a good idea. Trade Well,

Mike Siewruk

P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video.