Is there ever a confirmation in Trading?

October 1, 2009 in Education, ER2, Psychology, Reflections, Technical Analysis, TF

It didn’t dawn upon me when I first started trading, but now, come to think of it, is there ever a confirmation in Trading?

Confirmation?

Yes. After the “signal” given by the indicators, we shall wait when the price goes to a certain level before we know that the move is “confirmed”.

In the chart above, on 22nd of Sept, I drew an area of support from 613.7 to 614.5. This is what Sam Seiden will call a level of demand where there are more buyers than sellers. Why is that so? Because on the previous day, the price closed at that price but today it gapped up 4 points to the opening. Basically more people bought, causing the price to shoot up.

Let’s see what the next price move is.
next
The 2 timeframes are different because I just took the 2nd picture today and tick charts only last for 5 days on the TOS charts. Now, where is the confirmation that the price is gonna reverse?

It should be on the 2nd chart when the price reverses back to the same level and held it up, forming what many call the double bottom pattern. So this time round, everyone is happy.

Let’s look at the next pattern:

Same thing here except it was a supply level. The price gapped so much at the opening. So now, when is the confirmation?

If you had waited for confirmation, you would be disappointed by noon. You would think that it’s not your day and closed your trading platform.

What do you think? Is it better to wait for confirmation? I personally think that confirmation is the move that you are anticipating, and once this move is “confirmed” your chances of getting a good trade is reduced. Your odds are leveled once the move is “confirmed”.

People talk about mindset, psychology, but nobody talks about odds in trading. If you ask a gambler to play a new game that he/she has never played before, the first question from this person is “what are the odds?” Often, this odd refers to how much that can be won or lost. They always forgot to ask 1 more question: What are the odds of winning?

That would be a whole different topic but it plays a part. So to confirm or not? The choice is up to you.