Don’t Chase Price

Today is a perfect reason why you don’t chase price when the market starts running hard and fast without you. 

Here is what happened to price chasers over the last seven trading sessions:

Friday, June 24th: (First day after the Brexit): Must short the market. Everything is crashing. 

Monday, June 27th: Press those positions. Dow 16,000 here we come

Tuesday, June 28th: Wouldn’t have thought we’d be bouncing so soon. 

Wednesday, June 29th: Just a dead cat bounce. 

Thursday, June 30th: Smart money will be getting out at any time now. 

Friday, July 1st: @%#!, @%&!. What is happening!?! We’re going to be hit new all-time highs. I’m covering and going long. 

Today, July 5th: Just some minor profit taking. I’m going to hold through it. The bears will get squeezed again. 

DO YOU SEE THE PATTERN?

It is what happens when you chase price. When you chase it, you will be like a dog chasing his own tail and as a result, you’ll be buying at the highs and shorting at the lows. 

You have to make price work for you, and not leave yourself at the whims of the market action. Following Friday’s anemic price action above 2100, risk/reward clearly favored the bears coming into this week. It may not last long, but if you are chasing price you will find yourself haphazardly chasing every price move, and consequently being always on the wrong side of the market. 

Like I said, let price come to you, let the right risk/reward scenarios present itself, and when the market starts to move against you, don’t be the hero and hold out for more, learn to take profits and move on to the next trade setup.