How To Tell If Your High Probability Trade Is About To Fail

In this video I want to talk about ways we can help identify areas where a good setup is likely to fail. Basically, in part, this plays off of some of the videos I’ve taught you in the past here in the Trade Like a Professional series about identifying areas of accumulation and distribution and support and resistance.

Let’s look at a live environment in the video above. We had this situation where we ended up having one of our setups – and of course, we have 22 different setups that we can pull from in different environments – because we had a certain type of trending environment here this morning, we ended up having a signal.

Now, the thing is about this particular type of environment, we also have to consider the question, is there room to grow? Is there accumulation or distribution in the backdrop? So if I’m looking to take a long side trade, for instance, is there actually room to grow? As you’ll notice in the video, this was basically this time frame right here, just a few moments ago. You’ll notice that we ended up having this distribution in the backdrop here. We also had it here. You can also see the bar right up here, as well as right here. So multiple areas of distribution on the various time frames here.

So what does this basically mean to us? If we’re taking a trade with a fresh buy signal into known distribution, we have a much lower probability opportunity for this to work. And this applies whether this is a 2 and a 5 minute chart, a 15 minute and hourly chart, a daily and a weekly chart, if you’re a swing trader. So this is a very important technique, as we look back at where that accumulation or distribution is. So if we’re looking to go long based on one of our signals, do we have distribution right in the backdrop?

If we do, then what I look to do is modify the signal to not take the entry within the distribution in the backdrop, I look to wait until we break through that distribution, and that’s where I’ll look to take the entry. So that’s one thing I want you to look at. That was an example live from this morning here in crude oil.

Let’s take a look at another example in the video above. We had the exact same scenario. It’s not just about taking the trades that are the higher probability; it’s also avoiding the trades that become lower probability, even if they’re normally a quality setup, if you’re into key areas of support and resistance. So there’s no real room to grow. So this is the exact same scenario that happened yesterday here for us, and we followed this through. We had another setup take place over here. We were looking to go long, but at that time we ended up having layers of distribution right back behind us.

Also, not only did we have that distribution that I taught you in the other Trade like a Professional videos, on multiple time frames – the 5 minute, the hourly chart here, the 15 minute chart, you can see we had daily and weekly pivots – boatloads of resistance across the different time frames. Then we had at least a plan. So we saw a buy signal, and we recognized we were right in the heart of a resistance zone. So then the plan was to wait to see if could trade outside of that distribution area.

So there’s still ways to make a high probability that turns into a lower probability trade because of distribution or resistance a tradable event, but you’ve got to get through those key support or resistance levels at that time.

What you want to do is go back, make sure if you haven’t already seen those other videos to watch them and see how I determine those key support and resistance levels. That’s going to be very important, because that’s a tool we use each and every day. So we got into good trading with the crude oil earlier, but then we avoided the bad trading in crude, and previously, we did a very similar thing in the NASDAQ as well.

So just a reminder, make sure before you take any of your trades, whether they’re high probability or otherwise, make sure that not only are they high probability, but you have room to grow. And using this distribution-accumulation, support-resistance type technique is one way to increase those probabilities of success.

All right, so take the information from this video, take it in and butt it up against the information from the other Trade like a Professional videos, and help yourself become a better trader. We’ll see you in the next video.

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