Hey Stainer,
I read your post and can empathize with what you are saying. Essentially, what I am hearing from you is that you can spot a trending market and take profit from it, but when it consolidates/range, that is where you loose money when you try to pick tops/bottoms to take some profit, but eventually get stopped out. Am I correct is this assessment?
If that is the case, rather than trying to pick tops/bottoms, why don’t you enter a trade after you have a confirmation? During consolidation periods, trade on a smaller chart, say the 1hr or 5 min chart where things are clearer and the internal waves are more obvious. If it is in a bear trend and then it consolidates on the bottom (like your example), first you have to let it settle for a bit, meaning a range has to be defined whereby the tops and bottoms are clear. When you have a few tops and bottoms to define a range, then you can draw lines to define the channel in which it is ranging in. So whether you are going long or short, when the market hits the top of bottom of that channel, you can open a position and set the stop slightly outside of the range to limit your losses. Make sense?
Secondly, like what Kar Yong also touched on, it is also a matter of psychology/emotions. You’ve identified a trend, you took it and now you want some more. But the thing with consolidation is that it is a far different animal from a trending market. Like you said, it is choppy and hard to identify entry and exit points. It doesn’t mean that you lack the skill to trade the chop, so to speak, rather, there might not actually be any clear signals to enter at that point. You don’t have to take every single movement.
If you missed out on some pips during choppy markets, its okay. It is not a lack of skill on your part, the market is simply showing that it is undecided hence very hard to read. Think of it like a tide change, when the tide is coming in or out, you can see where it is flowing, but as it changes, it is very unclear. All you have to do is wait for it to resume its flow and then you can jump in. What do you think?
Lastly, when you look back at charts and see that you missed potential money moves, there is always a sense of regret. I could’ve taken that section of movement, or this section, etc. Hence, that really creates an impulse to trade all the time, rather than at times when things are clear. This I see as strictly psychology, the sense of gain and loss. When you can arrive at the place where you feel a greater sense of equanimity where taking money or losing money doesn’t shake you that much, then you can also be much clearer when to enter a trade and when simply to stand by the banks of the mental river and watch it go by without jumping in and feeling like you’ve lost something.
Hope all this helps!
Godspeed!
