We've seen yuuuuge volatility over these past couple of weeks. And with volatility comes the temptation to chase...
I saw a comment that "if there were any new retail traders left, this week killed them".
To me, that massively under-estimates the bouncebackability (yes, it's a word) of retail traders who've tasted the sweet nectar of volatility for the first time.
"If I can lose money this fast, imagine how quickly I could make money if I got it right..." (click, click👇)
As a trader, volatility is a necessary evil.
Without some volatility, there's no way to profit, but too much volatility can be hard to cope with.
Which is where patience comes in.
As an example, let's take a look at gold on the daily chart.
Within this structure and the volatility there were some clear & well-defined trades. We'll focus on three. (Numbered in chart above).
Trade 1 (H2 Chart)
Over to the left, price was in a wide range. Perhaps a slight upside bias after the spike down to 1750 was followed by a sharp rally to 1810.
Another range forms with lows around 1785 & highs around 1830.
A sharp rally (into the yellow box) established a new range above 1830...
Until it failed to hold.... and returned to No Man's Land (within the prior ranges).
If you'd chased the breakout, you probably got stopped.
Then price has another crack at pushing higher. Away from No Man's Land and back up to the prior breakout.
A reclaim of that failed breakout area could be in play. Zooming in...
Why look for the 'reclaim'?
From a game theory perspective, lots of sellers will be caught offside if this move holds. They probably sold in and below the yellow box with stops above. If they're forced to cover, that order flow together with new buying will drive price higher.
The reclaim is a solid sign that buyers are in control, and entering here avoids the chop down in No Man's Land.
Breaking above 1816 (lower dotted line) and retesting from above is the first sign. Could have been a good aggressive entry there.
The highlighted candle at 1823 was the real confirmation though.
Rally to new highs above 1856 and....
Bullish bias in play! Looking for a new range to form above 1856.
A limit order at 1842 (top dotted line) goes unfilled 😭
The yellow box is a strong signal of intent to push higher.
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Getting exciting now. Market's moving fast. Everyone's talking about gold to $2,000.
Just want to get in. Didn't get that limit order filled at 1842, ended up chasing it higher. This thing's really moving!
Market order YOLO at 1890.
"Thank f*ck I got in where I did! 2k here we come! I'll move my stop to breakeven to protect my profits and enjoy being such a legend."
What happens next...?
The YOLO chaser got REKT. Stopped out, profits evaporated, demoralised. No plan to re-enter, blames the market makers...
Butt he patient trader got filled right on the 1877 level, and THEN price started the grind higher to $2000.
When volatility picks up, it's hard not to chase. Time speeds up. It feels like the market's getting away from us.
Maybe it is. Let it go.
We must be patient, even if we hateses it.
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