Devil’s Horn Pattern
Some things you just know from experience and happens too fast to tweet or write about. Again, trading is dynamic. You must be able to change your thinking in a heartbeat.
So here I am thinking out loud. It was the 26th so I expected fireworks. And we got them.
The flash rally that went over 7600 for second time and when it failed this was a screaming sell. I call it the two horns of the devil pattern. I have seen it time and again. Especially in silver.
I sold 7535 risking previous days high and bought back at 7221. Again, I mentioned that aggressive traders could sell against previous day’s high. And I am aggressive. The trade lasted less than four hours.
Here’s what happened. Stops were hit, the previous high over 7600 was tested, then we ran out of gas. There was no way to predict the rally before the crash, but when you get a rally like that and it fails, look out below.
I got bullish on the 25th because the market reversed when it should not and there was a low risk long trade. I was looking for it to take out the 24th low. When it didn’t I reversed my shorts to long. See first blue arrow.
Got stopped out.
Took a small loss on my long (a rather large position, larger than my previous short). The new short trade today was much smaller than my long trade, lost 50 points on my long, but picked up 300 points on the short so made up my loss even though position was 1/5th the size.
Any magic to buying back at 7221? No. I bought back there for two reasons. That was where I thought the market was going at the start of the week. And it was also the point where I got all my money back.
If I had not been stopped out of my long would I have been smart enough to take profit and reverse? I like to think I would have. It was a perfect swing trade, and when a trader is in his grove this can be done and account size quickly grows.
There is an element of luck. But you must be able to play the game to get lucky, and if you play long enough your day will come. That is how you can turn 1 btc into 10 btc or 5 btc into 50 btc, or 10 btc into 100 btc. It can be done. I have done it and you can too.
Yes, it is important to start out as small trader. Large traders lose big. A small trader can become a large trader. It takes time. It takes discipline and most important money management. The technical things are helpful, experience is helpful, but the number one thing is money management. You must be able to play the game or all is for naught.
Again, I have been treading water all year so far. And consider it a victory. If you can trade for year and break even, your day will come. It is quite an accomplishment. Few can do it. But once you do you are much more likely to go to a high level of success.
As far as outlook? Well, we accomplished this week what I was looking for just in a way I did not expect. So actually had a pretty good week and made up the from my buy at 9050 that got stopped at 8650.
All indicators are still down.
By every definition we are in a bear market. There are simply two factors which are really more fundamental than technical that makes me think we may be in for a long sideways market rather than a spike down reversal. The basis says buy the futures, sell the spot. And the 1st quarter reversal was a whopper. Yes, we can go to $6000, $4000 or even under $2000. But we must break that 1st Quarter low to do it, which I consider a big if. The thing is be prepared mentally for whatever might come.
It will be very interesting to see the market action when the long term moving averages all start the move down. Stay nimble and good trading for all of you.
Hope this helps.
UOG
