For me, the idea behind every entry should be how you expect price action to react at support and resistance levels. From my experience in teaching and observing traders all over the world, it’s not the difference in what we consider a support or resistance level that separates traders. Remember that in a zero-sum game there is a buy at every sell and a sell at every buy…someone has to take the other side of the trade.
I believe the difference between what goes in my head (internal psychology) and what the market is reflecting (external or market psychology) is where the greatest challenge lies for most traders (and investors for that matter). I am never more “right” than the market and the market is never wrong. Get the idea out of your head now that the market is wrong…or right…I don’t believe it’s either. In my opinion, it’s simple and is too large to be argued with. The market is an overall collection of opinion. Keep in mind that it’s our job as traders is to identify that opinion - you could also call it psychology - and with this you will never forget what your goal is.
The market can have differing opinions in the short and long term which is why I will look for market trends individually across each time frame that I will potentially trade. Understanding the market trend or phase on each time frame is market psychology. I want to identify where the psychology is most clear and that translates into which time frame has the most clarity in my 34EMA Wave “clock angle” reading.
For example, today the EUR/USD has transitioned into a more sideways, neutral market trend after the dollar plunged through the support of the Wave on the daily chart. This in turn changed my analysis of the directional bias of the dollar. Most of my entries were based upon dollar strength but now there is a change that the dollar will be neutral and that means the bullish bias the dollar has had is no longer applicable.
As I can see it, the GRaB indicator had been dominated by red GRaB candles which reflected bearish sentiment and momentum. The four to six o’clock angle of my 34EMA Wave confirmed the downtrend. Now that there is green and blue on the daily EUR/USD, the GRaB is signaling a slightly bullish but mainly neutral market trend. If this holds for the remainder of the week, I believe this could change everything.
The daily is in transition and in my opinion transitional markets are seldom (usually never) going to be the clearest in terms of market psychology. So while I must respect the shift in directional bias, I am likely not going to set up trades based upon this time frame.
Currently, the best CLARITY in my opinion is coming from the 240-minuite chart. This time frame has a twelve to two o’clock angle as well as all the criteria I would look in term of the CHARACTERISTICS I WANT FOR CLARITY: A smooth set of moving averages, respect (support) on the recent pullback, and it’s also established in terms of how long the Wave has been trending higher at twelve to two o’clock. The GRaB candles are solidly green and this is also a bullish sign. Because of this, my entry will be based upon further support on pullbacks and buying into that support. I am trend-following because there is a trend on the 240-minute chart and I am buying into support because I feel that due of the trend, buyers will support pullbacks. In my opinion the swing buy is no longer an entry that would be contrary to the directional bias of the daily because the daily is now neutral.
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