Stock Market Watch

Topping Markets: The Trader’s Edge

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Topping Markets: The Trader’s Edge

Waiting for the market to reach an edge is like waiting to sell a high-end piece of real estates. A commercial real estate agent can work a single deal for weeks or months without a single profit; but when that deal finally closes and that commission check rolls in, the waiting period is proved worthy.

Think about it, a $30 million commercial property would yield between $450,000 and $900,00 in commission for the agent (depending on their status as a broker). You can see that it wouldn’t necessarily take many of these deals per year for the agent to live a comfortable life style.

Similarly, the trader is forced into this inevitable “waiting period”. In order to cash in on big price moves in the market, we (as traders) have to wait for price to reach an edge (top or bottom) so that when subsequent reversal occurs, it proves to be something worthy of our patience. Cashing in on these “market topping” trades can certainly provide similar results to that of the commercial real estate agent depending on the trader’s available liquidity.

Trading that market edge is always our objective here at Forward Thinking. We have been closely tracking the price action on the GBP.USD over the last couple of weeks waiting for price to reach that perceived top, and let me just say, that the wait was well worth it.

We had identified an area on the chart that we were interested in doing business and when our price level was hit the trade was “good as gold”.

Locked in 94% Profit Shorting the GBP.USD – Join Now

We shorted the GBP.USD last week when price rallied up to the $1.5412 level. Once the trade was filled we witnessed a rejection in price almost immediately as the pair began to pull away from this market top. Four days later we walked away with 154 pips (94%) in profit for that single position.

Our objective is not to trade every wiggle in the market, but to wait out those larger price moves. Here is a quick look at the chart from this recent position. Notice that the wicks of those candles were all that reached our pre-determined area of short interest which is an indication that price moves above that level were being rejected… all in all it was a nice confirmation for our position.

So we entered short at short the market at that red line and locked in profit when price dropped 154 pips reaching that green line.

Want to Learn How to Spot These Market Tops and Bottoms?

Forward Thinking Can Be Your Roadmap








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Justin Burkhardt (FXFocus.com)
Post Written By: Justin Burkhardt

As an active currency trader, my goal is to educate new and experienced traders alike to take advantage of the inherent volatility that exists in the Forex market.

My Objective? Winning trades. I implement strategies and tactics that help me to identify high probability trade set-ups. Approaching each trade with insight into the driving forces behind the market, I keep profit targets conservative. Long-term viability and volatility do not go hand-in-hand in this market. I strive to maximize reward while minimizing loss.

http://www.fxfocus.com

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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