Seeing Through the Eyes of a Professional Trader (Part 2)

12/09/2008 11:47 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

Continuing from yesterday’s article, price rallies hard but fails to break above the prior swing high. The break out traders may have been able to stay with their short positions, but it’s been a rough ride.

chart

chart

Traders that were short get stopped out for a loss when price makes a new high. And many of these same traders leave stop entry buy orders above the prior swing high, so they stopped themselves out of their short positions and have now stopped themselves into new long positions as price breaks above the prior swing high.

chart

Price rallies hard again, making a new high. The break out traders that were short are now stopped out of their short positions as price makes a new high. And because price broke above the prior swing high, they go long as price makes a new high.

More in Part 3 tomorrow…

I wish you all good trading!

Best,

Timothy Morge

timmorge@gmail.com
www.medianline.com
www.marketgeometry.com

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