do you ask why in trading

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http://www.premiertraderuniversity.com/ptucourse -- PTU Trading Course! Why clutter your mind with information that won’t help your trading? Asking “why” is something many people ask but don’t know how to implement the answer into their trading. In my opinion, “why” makes much more sense when asking….. “Why should this work?” As you search out any trading method, knowing “why” it should work is of paramount importance. “It just does” is not really an answer that I can quantify nor feel confident there will be consistency. http://www.netpicks.com/trading-article/why-trading/

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Page 1: Do You Ask Why In Trading
Page 2: Do You Ask Why In Trading

Why clutter your mind with information that won’t help your

trading? Asking “why” is something many people ask but don’t know how

to implement the answer into their trading.

Page 3: Do You Ask Why In Trading

Let’s use an example of something that many people are quite familiar

with – oil. (then I want to show you when why is a great question)

This chart clearly show that crude has been falling in price for quite a while.

What is causing the drop?

Page 4: Do You Ask Why In Trading
Page 5: Do You Ask Why In Trading

You can certainly go into geopolitical factors but at the end of the day,

generally less demand for oil and a larger supply causes cheaper prices.

Page 6: Do You Ask Why In Trading

To get more in depth, it’s quite easy to suggest that the oil producing nations will slow production, lower supply, and the may

cause buying pressure to kick in.

Does that help you in your trading?

Page 7: Do You Ask Why In Trading

It made my in-laws think I was smarter than I am but for trading, it does nothing for me. I will see

events change in the price before I will be able to decode all the intricacies that may make price move in the other direction.

Page 8: Do You Ask Why In Trading

In my opinion, “why” makes much more sense when asking…..

“Why should this work?”

Page 9: Do You Ask Why In Trading

As you search out any trading method, knowing “why” it should work is of

paramount importance. “It just does” is not really an answer that I can

quantify nor feel confident there will be consistency.

Page 10: Do You Ask Why In Trading

This chart shows a simple moving average cross over and a buy stop above the bar that caused the flip. Moving average crossovers is still a

pretty popular trading method but the question is….”why should it work?”

Page 11: Do You Ask Why In Trading
Page 12: Do You Ask Why In Trading

All that has happened is the average of X bars has increased which caused the

cross. Is there any reason that should have caused an increase in buying pressure? Is there any secret moving average

to use?

Page 13: Do You Ask Why In Trading

Why should this crossover trigger an imbalance big enough to move the

market? I can’t answer that. Hanging my trading future hat on this

type of method when I have no clue as to the “why” it should work, would be

a mistake.

Page 14: Do You Ask Why In Trading

How about trading support and resistance levels? This is another very

popular method of trading. Why should they work? We read that these levels are closely monitored and

can set up “high probability” trades depending on the levels.

Page 15: Do You Ask Why In Trading

People love to trade around these areas. Let’s see how well this works……

Page 16: Do You Ask Why In Trading
Page 17: Do You Ask Why In Trading

This random chart has several areas marked off and full disclosure, this is after the fact: A. Support breaks and price retests from the underside B. Price bounces nicely off of this level and while counter trend, it’s 200 pips

Page 18: Do You Ask Why In Trading

C. Price rallies and bounces off resistance for a 115 pip move before price rallies D. Another resistance bounce and price drops over 400 pips

Page 19: Do You Ask Why In Trading

There are other areas I didn’t mark off such as between A and B but the chart

would have gotten cluttered. As you can see, pretty nice moves that

all offered up some profits.

Page 20: Do You Ask Why In Trading

Seeing this chart and the profits that could have been made, there are a lot

of people that would pay for the “secret” of finding these levels

inside of previous data and extended out to the hard right edge.

Page 21: Do You Ask Why In Trading

Let’s scroll the left and see if these same lines had previously been used.

You will clearly see that these levels

were used previously as well!

Page 22: Do You Ask Why In Trading
Page 23: Do You Ask Why In Trading

The fact is….I don’t know why these levels worked so well.These levels

were found with a highly scientific and number crunching method…..

Page 24: Do You Ask Why In Trading

I closed my eyes, picked a random chart, just dropped random lines on it, and then

opened my eyes to see what I got.

That whole chart is random. Random lines got bounced.

Page 25: Do You Ask Why In Trading

There really is no reason why price should have bounce at these

levels…some right to the pip.If there is no reason I have to ask….where is the

edge?

Page 26: Do You Ask Why In Trading

Random levels provided great trading opportunities! These levels even had multiple touches in the past which is one thing you look for in determining

s/r levels!

Page 27: Do You Ask Why In Trading

This means that others may have determined these levels to be strong.

For me, I don’t see an edge that can be exploited consistently. I also don’t see

why big money would come in at these random levels and move the market.

Page 28: Do You Ask Why In Trading

All is not lost though. In a future post I will touch on the “why” of certain

areas that will usually show an imbalance to can

lead to some decent trading.

Page 29: Do You Ask Why In Trading