Pattern Recognition in the Heat of Battle

I find that it is difficult to remain rational and calm in the heat of trading battle. Patterns that are easy to see after the fact are difficult to see when trading emotions are at a high level.

One of the things that I should pay more attention to is when the market tests the 50 - 62% correction levels in any direction. The market will not automatically turn at these points, but attention to how the market reacts to these points is important.

At around 1458 - 1500 ET yesterday, the market did turn at a 50% correction level. However, it did not make a new low, but rather bounced again in the opposite direction after trading down to another 62% correction level at around 1511 ET.

On the 1 Minute Chart above, we can see that after the market reached the 50% correction level at 1458 - 1500 ET, the market gave us a 6 Minute window to enter a short trade with a small risk relative to the potential reward.

Between 1508 and 1515 ET, the market then started to show some strength. Many traders were probably expecting the market to continue to the down side, but the $TICK was indicating otherwise. As the market kept testing the 824 area, the $TICK kept closing to the top portion of its 1 Minute bars, and the trend was starting to inch upwards. At 1515 ET, the market shot up to the upside quite rapidly.

One of my problems is believing what I am seeing rather than believing what I think the market should be doing. Remaining rational in an high emotional state takes practice, but is essential in trading success.

Charles