There is a few ideas I have formed from watching trading screens and executing thousands of trades over the last 10 years.

To me it seems that markets trend when the majority least expect it.

This creates the fuel for a directional move as traders caught in losing positions cover and momentum traders jump on the trend.

For a group of traders to be caught out a sudden directional move is required which requires a re-adjustment to the new reality.

The past 2 posts illustrate such a move with the "failed probe".

There are other patterns like the tap pattern, pump fake and inside bar failures that create this cause and effect.

It may be worthwhile with trading to think in terms of boxing.

The advantage is gained in trading by hitting with a counter punch when your opponent is off balance.

Alexander at www.tradewithpride.com has been a great help in creating a trading structure around various setups and some proprietary parameters that I have adapted to fit my style.

A Real Trader VS the pretenders

It frustrates me that many traders and investors seek out education from gurus and investment advisers that don't make profits themselves.

If you are forking out money to improve your trading I think it is important to do your research.

Although I don't regularly post my results. (I don't have the time to teach and I think Alexander does a good job) you can see my past results on my old blog at http://davinstradingreport.blogspot.com/ on the right hand side.

Since this time my results are still what most regard as excellent returns. (I think it is important to show I am a profitable trader because many in this game don't walk the talk)

I will get my last few months results once they're audited.

Reversal moves are often initiated after a failed new high or new low.

I call these "probes".

This gives me the first clues that some traders are caught in losing positions and will have to cover forcing a move in the opposite direction.

The Dax today had a few occurrences on the 5 min chart.

We can separate these into 2 types of failures.

One is a failed test of highs or lows at an exhaustion point.

The other is as price looks to be rolling over but quickly reverses.

Not only can we use these as potential setups but if we are in a position and this type of pattern sets up against us we can recognise it and close out quickly or reverse our position.

I

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The Dax formed a Tap Pattern today with nice downside follow through.

I didn't get the full move but made some nice returns on the move lower.

The tap is formed when price spikes to a high then retraces with the next attempt up forming a lower rounded top.

As we get an expansion bar to the downside a possible trade can set up with good risk/reward parameters.

For other examples do a search - "Tap Pattern" in the search section at the top of the blog site.

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The ability to see price action, initiate a trade and develop a profit and risk profile is required for success.

There is no single way of doing this but there are guidelines and structure to take into account.

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What does this 5 min chart tell us at this time?

We have 2 failures at 5470 which was support yesterday but has now become resistance.

Price has just broken to a new low after the first 5 min bar.

The next support is 5455 which has multiple moves off this level. (these areas are often like magnets for price to hit and bounce off)

If we took a short trade on a break of the bar low we could risk a reversal of the traded bar plus 2 ticks (1 point) which is 3 points.

If we enter 2 ticks below the last low on the next bar at 5464.5, we could look to take profits at 5456 which is 2 ticks above support.

Potential reward is 8.5pts for a 3pt risk.

These parameters are what I am looking for.

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