It's very important to remember that what I am doing here - I'm not trying to predict anything.
I am just noting on the chart what I would
like to see happen.
Price may roughly follow my arrows - or, more likely, it will ignore them and just do its own thing.
The important point is that mapping out on the chart what I would like to see happen helps me to trade in a
proactive rather than a
reactive way.
If I have considered what price should be doing, I have embedded in my sub-conscious what I would
not like to see. That helps me to very quickly move into defensive mode when price is not moving in my favour.
When price strays from my arrows, my mind quickly moves away from focusing on the
reward side of the trading equation, to the
risk side of the equation.
I am under attack from the bulls, and I must move to limit the damage.
Sometimes traders struggle to make this switch fast enough or sometimes even to make it at all.
Even when price is moving against them, and their losses are mounting, they are still focusing on how to get a profit out of the trade. When price might turn around, how long will I have to wait until this trade comes back, giving it "room to breathe".
This is madness.
Instead, their focus should not be on how to make a profit out of a trade that is clearly moving against them, it should be on how to swiftly and decisively move to
limit any losses.
That is a key skill to learn.
When a football team doesn't have possession of the ball - they play in a certain style. They keep their formation, their line, their discipline. They track back, get tight to their opponents, watch for runs, press their opponents into making a mistake.
Then, when they win the ball, the style flips. Instead of marking your opponent, you try to move into space, you run forward, you attack.
Attack, defence, attack, defence.
The teams that can quickly transition from one to the other at the right time will always have an advantage.
Same for traders
