Forex Traders Daily
Trapped Traders Daily Analysis
Planning Stop Hunts
December 1, 2017
Hello traders, Mark Chapman here, the creator of the trademarked Trapped Traders Concept.
Welcome to today’s Trapped Traders Trade of the Day Analysis. Today’s date is Friday, December 1, 2017.
And the chart I’m going to bring your attention to is a daily chart of the EURGBP. Off to the left it’s a level, but we can’t fit it all in. So, here we go. Level of resistance. Support. Support. You get the drift. Support. Support. Support. Support. Okay, so we have the potential for a manipulation at this level and for traders to be trapped and for a stop hunt to unfold.
So, what we want to see as per usual is we want to see some entry cheese at the level. You’re getting some buying already, so that’s encouraging. We’re not quite at the level yet. It’s a very well-defined level. Always want to be your starting point. There are many levels that aren’t well defined. Makes it double difficult to understand the manipulation. If it’s clear as day, It’s easy to do. If it’s not, it’s difficult to interpret.
So, it all sort of pivots off your ability to find a high-quality level. And if you can find a high-quality level, meaning just being touched several times, a minimum of twice. Not bastardized in any way. Something like this. This is like two pips or something. It’s nothing. That wouldn’t have been much of a stop hunt in the previous example of the level and it’ll bear no relevance to this one.
If you were a trader in here and you went long, you’ve made your money. You’ve had a couple of chances if you didn’t bail at this level, which some greedy souls wouldn’t have done. They would’ve tried to hold on, thinking it was going to follow through. They would’ve definitely bounced when they got a second chance and they realized their mistake. So, there are no stops there. There’s zero, nil-pwa. However, when price comes to the level, that’s the whole point of there being a huge amount of emphasis on the reaction at the level, creating the illusion that the level is going to hold.
So, it would look like this. And it’s always different, but it’s always the same. Who knows? It could be a big engulfing candle. Could be some type of doji. Could be several candles. The point is if it’s two or three candles, that’s enough to get the vast majority of traders who are going to take that trade. It’s going to be tempting enough to get them in. People always ask me how far they should go. Well, ultimately, it should really only be in that first sort of.
If you’ve got a range, in this case, it doesn’t want to be more than a quarter. One-third tops kind of thing of that distance because if it continues on for much longer, these people may make money and they’re gone. So, it can’t be too big, but at the same token, it needs to be enough for it to be convincing enough for those who are going to take it. That’s ultimately the bottom line. If you’re a support-resistance trader and you happen to be looking at this timeframe and you happen to be looking at this pair and you happen to be looking at this level, then there’s a good chance two or three candles will get every single person that is going to come in to come in.
So, for instance, sometimes what you’ll see is a bounce off the level in real time, but then the candle will actually reverse. Obviously that would be red, but you get the idea. And you’d get a wick. That’s actually entry cheese. However, it’s subtle. You might miss it, but it is entry cheese. However, that doesn’t get in every type of level trader that is potentially going to pull the trigger at a level like that. It’s only going to get in those aggressive breakout traders who are buying as the candle is still live.
That doesn’t get everybody in who’s going to come in. That’s why I’m saying if you get two or three candles, that’s going to get everyone in. If you’re going to take it, you’ll enter at some point. So, for instance, you’ll have the aggressive traders going on the live candle. You’ll have the more cautious trader wait for the close. If it’s an engulfing or some type of positive close, that’s going to be more enticing to everybody who waits for that singular candle. Maybe someone waits for the swing to complete. Something like that, and then a breakout. All these variations are ultimately drawing in every single support and resistance trader that is potentially going to take this trade; will have ultimately took the trade if it’s more convincing.
But at the same token, as I’ve said, doesn’t want to be more than a quarter or one-third because after that, they’re basically making money and the trade is going to be a trade. So, we never know whether or not a manipulation is going to happen. Some people keep saying to me oh, that level broke. Yeah, of course it does. Just because we’re setting up and we’re preplanning a potential setup doesn’t mean the setup will develop. It could break, but then it’s not a setup. It was never a trade.
And obviously you get scenarios where you take the trade and you don’t make money. That’s part of trading, but was it a good trade? Ultimately that’s what it’s all about. I had a conversation with a friend of mine who’s a market maker and we were having a conversation about the irony that people focus so much on strategy because, from his perspective, seeing tens of thousands of trading accounts over his career, the two biggest things to blame for traders’ failure was not strategy. It was the inability to manage risk, number one. And number two, overtrading.
So, it’s kind of funny that people focus on strategies, which is what they do, when in reality it’s the downfall of the individual. And I’m sorry to say that. It’s makes for hard reading for many people, but it’s generally the downfall of the individual. It’s the reason why they don’t make it, I.e., the implementation of proper risk management and not overtrading. Everyone is overtrading. Everyone is obsessive about oh, you haven’t taken a trade for a couple of days or something like that.
No, because we’re taking quality trades. The brokers want you to overtrade because they get the commission. The brokers. The investment banks want you to overleverage because that’s financing the debt from the broker to the investment bank for the big money that they’ve put up for them to be in business. So, none of it is setup for you to succeed and it’s poignant that the vast majority of people who fail, fail because they’re doing exactly what the broker in the industry wants you to do. They want you to overtrade. They want you to go down on those shorter timeframes and be super active.
They don’t give a shit whether or not you make money or not. This idea that’s out there that oh, well, they’ll gain a lifelong customer. They really want you to succeed because they’ll get bigger spreads as you become more successful. The reality of it is, is to wait for the odd freak of nature to nurture the odd freak of nature who’s actually going to make trading work takes time. They don’t give a shit about that. They’re not in it for those reasons.
They want to churn and burn. That’s the business model. It’s been proven a zillion times. It’s beyond doubt. But everyone gets dragged into it and they’re still being dragged into it today. So, forget about wins and losses. Forget about overtrading. Focus on the process. Focus where you’re supposed to be spending your time. As I said, everyone is bouncing from strategy to strategy and trading foreign conversation to trading foreign conversation, and a lot of mourning. A lot of negativity. It’s a very, very vicious environment, but as my friend pointed out, most people are vicious and angry at the wrong people.
It’s probably you is the reason why you’re not succeeding, because you’re taking too much risk and you’re overtrading. And hopefully, when I’m providing information to you, guys, it’s going to help you not become one of the statistics and it doesn’t make for pretty reading. There’s many, many people attempt it and virtually hardly anybody manages it. Yes, you’re going to have losing trades. Yes, losing is part of winning. I even hate the term losing because ultimately you never lose.
There’s a way of never losing in trading. There is a Holy Grail of no-lose trading, and that is to execute on your process to the highest standard possible consistently over time and you’ll never lose. Just think about that. Now, you’re going to lose money, but losing money is not losing. You never lose if you execute properly. Where you lose and you should be upset with yourself is when you don’t execute properly, when you are not sticking to a strategy, when you don’t know the strategy well enough to make comment on it, when you’re not managing risk correctly. All of those things are negative and need to be dealt with.
If you’re emotional in a trade, if you’re angry at the trade not going your way, a million different trading dreads, then that’s a problem and you’re losing. But you’ll never lose in trading if you execute to the process to the highest possible standards. You’ll never lose. Even though you’re going to lose money, you’re never losing because when you make that trade and it doesn’t turn out to be profitable, if you executed on that process to the highest standards of wherever you are in your development – everyone is different, but wherever you are in your development -, congratulations, that’s a winning trade.
Don’t be upset by it. We’re losing. I hate the term. It’s so intrinsic in our language and so entrenched that even I have to correct myself from saying it. It’s not losing. It’s taking a good trade and not being profitable, but that’s the game. That’s the business. It’s a game of probability. None of us know which trades are going to be the ones that make us money versus the ones that are going to cost the cost of doing business. We don’t know when those trades are, when they’re going to come up, in what sequence they’re going to come up. Ultimately, all our job is as traders is to execute on our process.
Processes. Setup. Mindset. Risk management. You name it. The whole thing that encapsulates a trade during the course of a trade until its natural conclusion. Did you perform to your highest possible standards? If you did, congratulations. And if that made you money, that’s just part of it. Don’t get excited. Don’t get high about it. Stay balanced. If it didn’t make you money, but you executed, congratulations. Don’t get upset. Don’t get down about it. Stay balanced. Your job is to facilitate probability full stop. And you’re not going to facilitate probability if you’re taking too many trades and if you’re not managing risk and certainly if you’re not executing on your process.
So, anyway, I’ve gone on a bit of a rant there, but hope you found that helpful. And if you’d like to come and join me in my brand new inner circle, click on the link below. If not, have a nice day. Have a nice life. Have a nice weekend, and I’ll see you next week. Take care.
Forex Traders Daily