Pros are patient; amateurs jump in. How you add it to your trading playbook

 
 

Pros are patient;
amateurs jump in
How to add to your playbook


Best way to illustrate?
A real example

Monday
post a global asset sell-off
& post typical initial follow-through (think inertia)
Outcome is known: 6A is going down

 

Masses see
what they think is the bottom
they HAVE TO GET LONG

Why?
Because they approach the markets as "I must make money"
so they're eager to get into a position

By contrast
pros are focused on protecting capital
the market has to be screaming at them to put on risk

Without commitment from pros
a move up doesn't have legs to keep going

 

Now
what you can't see in the chart
is how convincing the move up was

It didn't meander upwards
it took off like a rocket!
and fast movement is intoxicating

So convincing was the move up
that when it rolled over
the masses can't immediately accept it

For many longs
a move like this takes them out
for others, disbelief allows a loser to get bigger


A larger than considered loss is tough to crystallise
But it's palatable if immediately into a new trade that's "making money"
So they reverse to the short side

 

And it's now

the market attracts interest from pros

Why?
They've seen this movie thousands of times before

They know the game,
and they take their cues from

  • order flow

  • tape reading

  • market pace

  • inventory positioning

 


Look again at the previous chart
and ask yourself
Where did professionals buy?
See it?

With pro longs now positioned
You can see what shorts (new and old)
will use as their line in the sand

 

By thinning resting liquidity above
and lifting a few offers
is all it takes to create the imbalance of shorts desperate to cover
that pushes prices aggressively higher

Summary:

  • Amateurs are eager to enter a trade

  • Pros wait until the ideal moment develops

  • Amateurs pave he way for pros to enter, unknowingly at their own cost

 
 
Adam Fiske