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Today we’re going to continue where we left off in the last episode. I showed you how the markets are manipulated to break a support line in order to have you scared out of your position. How the market then immediately reverses and starts a new trend in the opposite direction – i.e. in the direction that you and many traders thought the market would go – but everyone got scared out out their positions when the market broke the support line.
This is what Wyckoff traders would call a spring! The market is squeezed together like a spring, and when the tension is released the market shoots right up – just like a spring would do.
I have heard some pretty experienced price action day traders say that trading these springs is one of the best ways to trade the markets using price action only. And I definitely agree, and if you look at the chart I guess you can see why. After the market has broken through the support, it usually moves up explosively and the trader who bought down here makes a lot of money in no time.
Unfortunately, it is very difficult to trade these setups live, because it goes against everything you have learned about the markets and what’s supposed to happen when the markets break a support line – you will definitely think that the market will move down. So it also goes against your emotions, beliefs and rationale.
So my suggestion for how you can approach this instead is to let the spring and the subsequent market action play itself out – let the market break the low, let it reverse and start moving upwards. Don’t rush into things. Wait for the first pullback. That is when you should enter your position.
If this pullback holds above the previous low, the spring – then it will be a great time to enter your position. If the pullback is on lower volume and smaller candles than the up move then, just like we discussed previously, then that is a very good indication that the line of least resistance is UP – and you can go long!
So, let the market break the low, wait for it to move upwards, wait for the next pullback and enter your position.
You can also have the opposite situation for a short trade. Wait for the market to break the high, let it reverse and move down. Wait for the bear rally on lower volume and smaller candles and enter your trade. The bear rally should not reach as far down as the initial upthrust.
So that’s it. That a good price action day trading strategy. It is difficult to trade the spring or the upthrust, but if you wait for the first move and the pullback then it becomes much easier to trade this.
And hey! Just a few more days and the day trading mentorship program will start. If you’re serious about becoming a day trader, go to daytradetowin.com and sign up for the 8-week mentorship program where you’ll learn great day trading strategies and be coached by a pro trader. Get your free day trading simulator and live real-time data feed for practicing – at daytradetowin.com
Until next time, good trading!