Sideways price action or consolidation is a phase where institutional players are silently building their positions transacting in smaller quantities.
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What we need to understand is that big players have huge amounts of money and one major disadvantage of having such large cap is that they cannot transact in big quantities without being spotted (aka volumes)
In order to minimize this disadvantage to an extent, they will begin building their positions with many smaller blocks of orders to look like multiple small players and to not alert other market participants much.
This kind of price action does not result in major market moves since moving markets requires aggressive buying/selling at market prices.
Instead it results in a sideways price action.
When their positions are built, aggressive activity begins which results in markets moving in a trend. First positions are built slowly and then markets are moved aggressively in the favorable direction to get profitable.
When markets are in a strong trend, there will not be much time to enter large positions since prices move quite fast. Hence, this process.
When you see sideways action, do not think of it as boring but remind yourself that market is preparing itself for the next leg of move.
As a retail trader, best approach is to not get caught in this area and wait for the sideways range to be broken to get to know the direction of the trend.
For clarity, even within the consolidation zone, a retail trader can know the areas where highest volumes are transacted by institutions using "Volume Profile" and see how price action is at those clusters.
Trading decisions can be taken when price BO/BD such areas of VP.
Institutions can hide anything but not their volumes. It will emerge sooner than later.
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Yesterday, I met with a trader who wanted to make it in the markets. Advised on the following psychological pointers from my own exp:
Time:
1. You cannot become a successful trader overnight. 2. How long it takes depends on a person, the time they can dedicate everyday, their level of emotional control and balance etc.
Expectations:
1. There is no magic setup to turn 1L into 10L in a week or month. 2. Compared to other professions, trading can make you rich faster but not UNREALISTICALLY faster. If you have a golden goose, take one golden egg per day, don't cut its stomach in greed.
Thread on risk and trading psychology in day trading:
Some traders stress too much on RM and TP to cover their many incurably inept trading methods. Some simple rules which is all you need are:
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Pre-Trade:
1. Have a proven system in place. 2. Do not risk more than 1% of cap per trade. 3. Fix a number of trades per day. I don't go beyond 4-5 trades at any cost. Many days, I am done in 3 trades only. 4. Focus on R:R but also make sure you focus on POP.
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During the trade:
1. Be a trend follower. Higher rate of success. 2. Do not always book in full at target in the direction of trend. Book partial, move SL to cost and let it trail. More often than not, trends continue than reversing and will give extra gains.
1. Momentum is the one of the most important and crucial aspects of TA in trading without which opportunity cost is lost.
2. The main purpose of RSI is to assess the momentum of the current and past price moves (which we will discuss later). 3. RSI is measured between values of 0 and 100 with certain values being defined as overbought and oversold. 4. These values are not constant but depends on:
a. Time frame of analysis.
b. Overall strength of the stock's/market's trend.
c. Current Market cycle. 5. The size of the TF and value of RSI are inversely proportional. 6. Ideal trade conditions are when RSI on 5 mins>15 mins>1hr in case of bullish trend.