4 Types of Trades
In today’s trading environment we see a lot of junk being repackaged and rebranded and sold off as something that it really isn’t. If you’ve been around long enough you’ll see just about every type of “proprietary” secret indicator that gives you the “ultimate” edge you are seeking. As I’ve mentioned in past posts – the biggest edge is between your ears. However, there is another edge and that is understanding the trade patterns the market presents.
In truth there are only four types of trades in the market. Ok – I can hear the option traders screaming “that’s not true”…and I agree. Options are another ballgame and I will cover this in a later post. But for now if you are taking a one-sided trade then you really 4 options. Understanding these options, identifying which pattern the market is currently providing and how to trade and manage these trades can provide you the very edge you may be lacking. I will cover the various entry methods in another blog.
For now let’s get to know these types of patterns…the idea is to keep this simple. The ole K.I.S.S. method works best in trading.
A break out trade is a trade that breaks out from a tight range (coiling market).
A trend reversal starts either a new trend or a consolidation pattern. See chart below.
Counter trend trades are higher risk trades with huge benefits if you are correct however only advanced traders should use this type of trade. See chart below.
For anyone who wants to trade for a living and maintain any type of longevity they should use a Trend Continuation trade or a version of it. As some of the most successful traders have always said “the trend is your friend’! I say “find it and stay on it”!
Let me be clear one thing. I’m not saying a good indicator can’t enhance your trading, because it can. I use them but my main source of trade set-ups are these important 4 trade patterns. Understanding and recognizing the patterns and structures of the market can provide a greater edge and it starts with taking the time to learn them, understand them and see them live on all time frames…trade to trade well.
Trade Less Earn More!!