Many traders have heard me say in my live trading room: “you don’t need to be right to make money in trading.” Now this will typical throw them for a loop because, I’ve also been known to make a lot of market predictions.
So, what’s the deal?
Well, what if I told you that when we make predictions, it’s not about being right… in fact, it has absolutely nothing to do with being right or wrong. When I make a prediction in the market, I’m simple doing this so I have a plan to attack the market when it moves.
Let me give you an example. (please note I’m just using random numbers and levels)
Let’s say that I’m day trading on the EURUSD and that we just broke a significant intraday resistance level at 1.1300. Now the next level of resistance is at 1.1350, and since I know that “structure acts like a magnet,” I’m predicting that’s where price is heading next.
Now, when we are looking at a move like this, price can head to this level in two ways.
It can go straight there
It can ebb and flow (stair stepping / trending motion)
Now another thing that we know about price action is, normally when we break a technical level (like the resistance level we just broke in our example) that level will be re-tested as support before price action continues.
So, if I’m predicting that price is heading to 1.1350 and that price action will put in a pullback before reaching that level… I now have a plan of attack.
This is a very simple process that I walk through every time I look at a chart… It’s called: IPDE (Identify, Predict, Decide, Execute). So, we’ve identified that the market just broke resistance, Predicted that it will go to 1.1350, Decided that we will look for the market to put in a pullback, and then if all of this happens (and we have good risk to reward) we will execute the trade.
You see… simple, right!
Now, what if after all that the market just went straight up and blew right through the 1.1350 level without ever putting in a pullback? NOTHING!
That’s the beauty of trading. You don’t have to enter the market… sometimes the best trade, is no trade at all.
Now, if you’d like to actually see this performed on a chart… you can watch this in action by clicking here. It will take you to a YouTube video of mine, where I walk through this very process.
So, the next time your on the charts… try making a prediction and mapping out a plan of attack. Just remember, if things don’t go how you thought they were going to… if doesn’t matter.
Because you don’t have to be right, to be profitable.
Thanks For Reading,