FOUR scenarios have to be considered by intraday traders (15M charts and below) on a daily basis. In fact, these scenarios have to be considered by every trader. Before we look at them though, we must consider our bias – the direction we believe the trend is headed in for the day.
If you have a bullish bias, you will essentially have two strategies:
1. To buy dips in an uptrend, or
2. To buy breakouts to the topside.
If you have a bearish bias, you will have the corresponding two strategies:
1. To sell rallies in a downtrend, or
2. To sell breakouts to the downside
The Four Scenarios
On any given day, regardless of bias, you should plan for both moves up and down. Depending on your methodology, you may have different ways for projecting resistance and support. Nonetheless, the four scenarios should be as follows:
Scenario 1: Price moves up and you find a way to sell the rally. This will usually involve a level of resistance higher up, but not so high that it invalidates the bearish assumption.
Scenario 2: Price moves past a point where the bearish assumption becomes invalidated. In this case, price is breaking out towards the topside. Breakout traders would buy this, whereas bounce traders would wait for a small pullback to buy it. In this case, you also want to have breakout targets.
Scenario 3: Price moves down and you look for a way to buy the dip. This involves a level of support lower down, but not so low that it invalidates the bullish assumption.
Scenario 4: Price moves past a point where the bullish assumption becomes invalidated. In this case, price is breaking lower. Breakout traders would sell this, whereas bounce traders would wait for a small rally to sell. In this case, you also want to have targets to the downside.
Most traders never so much as consider these possibilities, but they are the essence of intraday trading.
With best wishes for your trading,
Private Fund Trader/Head Trader Consultant
“We take your trading seriously. You should too. Make It Pay.”
– Due to the demanding nature of personal attention required to provide trading success, only a few personal mentoring spaces are made available. Nothing personal – our own trading comes first, and if we commit to helping you, we want to do our best. Enquire via the website form (bottom of page). First come, first served.