Focus on the bigger picture and don’t get distracted by the hard right edge.

With the afternoon rally yesterday it’s very easy to become overly focused on the hammer candlestick and ignore the downtrend staring us right in the face.  Most people are naturally positive.   When money is on the line the desire to be right will influence how we visualize a chart.  We may latch on the bullish hammer pattern and be blinded to the fact that it has occurred at resistance in the middle of a downtrend.  Not the most helpful place for a hammer to form.  Failing to see the overall chart pattern is a bad habit that can be tough to break.

We may latch on the bullish hammer pattern putting on blinders to the fact that it has occurred at resistance in the middle of a downtrend.  Not the most suitable placement for a hammer pattern to form.  Failing to see the overall chart pattern is a bad habit that can be tough to break.  I call it hard right edge trading.  It’s times like this when the trader tends to focus only on the candle and become blinded to the bigger picture.  I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

On the Calendar

This data-laden week kicks off the morning with a potential market moving report on Internation Trade at 8:30 AM Eastern.  It’s followed shortly after by Factory Orders at 10 AM Eastern which can affect the market particularly if the number is a surprise.  Also noteworthy is the Fed speaker at the end of the day. On the Earnings Calendar, we only have 15 companies reporting today but, it’s wise to continue with the process of checking rather than being surprised.

Action Plan

With the futures continuing to push lower in the premarket I’m inclined to become very protective of the capital.  First thing first is not to panic.  Emotional decisions are rarely the correct business decision.  Remember to follow your trade plans because they are there to protect you from that emotional beast which costs you so much money.  As always manage the positions that you’re in first.  Set your stop orders and allow them to work for you!  If your new, inexperienced or struggling as a trader the best course of action may to simply set this one out!

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Trade Wisely,

Doug