BE DISCIPLINED!

This post will be a continuation of yesterdays DDD post. 

Let's face it. Everybody wants to be a trading hero! We want to be able to tell our friend/parent/coworker etc that we caught a bottom or a top in stock xyz. It makes us feel like we know our shit! we know what we are doing and we are masters of our craft. This would be great if you were a basketball player or a lawyer that won a case on a technicality. As a trader not so much. You can easily destroy your trading account trying to play hero and if you don't have your account you are out of luck my friend. Yesterday I spoke about how DDD was not yet ready to make its reversal because it still had not done what I want it to do to actually call a reversal.

Why is it so freakin difficulty to catch a reversal and trade it well. Why do we make so many mistakes when entering a stock hoping for it to turn. The answer is very simple. Because you want to catch it at the ABSOLUTE bottom. You want to be the hero, and that is where the problem lies. Why not be disciplined ( the name of this blog) and wait patiently for the stock to tell you "I'm ready, now you can take me in the opposite direction" Lets look at two different intraday patterns from today NFLX and TSLA. Both had been going down for a few days now and you could assume it they were ready to reverse, but the truth is you have no idea! ( sounded like MTV real world there for a sec). Let's first look at NFLX 3min chart 

I want you to pay attention at the entry point here. Is it the bottom. NO. I would love to call the absolute bottom , but I am not that good yet and frankly very few people are. What I do call is the change in trend, that to me is a much much higher probability set up that you can load up on and feel safe. Notice how it broke the trendline. You do not get in on the break of the trendline, not on a reversal play. You wait for the price action to re test that trendline or near it ( can also be a base )and then as soon as it holds that area that is your $$$ set up. You will notice similar action on TSLA.

They will not always look like this, at times the resistance will not be a trendline but a horizontal area of resistance. The idea is the same though. You want proof first of strength and then a re test of that area. That my friends is my way of trading a reversal set up.