LOOKING FOR REASONS

When I study my charts I look for what I call “Reasons”. What I mean by this is that I look for, through the eyes of technical analysis (but also look at an FA calendar), any “reasons” I can find for the market to behave in some predictable manner. The concept of “looking for reasons” can be applied to any style of trading (If I’m scalping I look for “reasons” that lead to a potentially good scalp trade. If I’m sailing I look for “reasons” that lead to a potentially good sail trade.). So when I do my analysis of the markets I look for ANY pattern I can identify (i.e. trends, Fibonacci, candle patterns, indicators, consolidations, reversals, Elliot waves, pivots, MA crosses, key support/resistance levels, anything). I look on both higher and lower scale charts to see the view from different perspectives. Generally speaking, there is never just ONE “reason”, but rather an interweaving array of multiple “reasons”. Often you’ll have conflicting

“reasons”, suggesting different expected behavior, but usually most “reasons” will converge (more or less) to indicate a strong possibility. For example, if you see a sideways moving consolidation then that may seem like reason enough for you to trade. Of course it is. But here is an example of looking for multiple “reasons”. What if that consolidation you see was the apex of a Fibonacci extension, that is actually right at the 62% retracement of an even larger swing, which is touching a trendline on an even larger scale trend, your S.E.X. lines are bunched, your consolidation appears to be a morning star candlestick formation, and your psychic hunch is that the market is about to move. You don’t always get so many perfect scenarios all at once, but you get what I mean by looking for multiple “reasons” that suggest some interesting possibilities. The moral of this story is that if you see something (i.e. the consolidation) then if you widen your vision you’ll often find supporting “reasons”. Remember the story I shared in “Forex Scalping” (near the end of the eBook) about the guy that was shocked when I accurately predicted the time of a triangle breakout? Well I didn’t tell you the whole story; I also accurately predicted the direction of the breakout. I don’t remember what the supporting “reasons” were anymore, but as I told you the guy thought I was psychic or something – but as you now understand I just looked for “reasons” to make an educated guess (ya know, I’m wrong sometimes). Ok, so what is the point of all this? The reasoning behind the concept of “reasons” is to reason out “reasons” for the reason why to make a trade (intentionally convoluted sentence - joke). If that was as clear as mud then let me restate that for you. The purpose behind the concept of “reasons” is to identify the probable scenarios of market behavior so that you can place an appropriate trade based on the anticipated behavior. In simpler terms just look for good trading opportunities. All of the trading techniques presented below rely on “good reasons”. For example, one of the techniques you will soon learn about involves placing entry orders straddling a candle. Just arbitrarily doing this at any time is stupid; you would only place such a trade when there are supporting reasons that lead you to believe that engaging into this type of trade is appropriate based upon current market conditions. (side note: Many people contacted me about “Forex Surfing” with a common misunderstanding – you don’t arbitrarily surf any wave you happen to see; only when the market is microtrending as I explained in that eBook. If you are one of those people who have this misunderstanding then please reread “Forex Surfing” and be

sure you understand the conditions for when such a trade is meant to be applied.) Pretend you are a handy man, or a carpenter of some sort. You don’t walk around with a screwdriver & screws and just start screwing things arbitrarily; you pull out this tool at the appropriate time when you have something that needs to be screwed (say you have furniture to assemble). Furthermore, when you have a task that requires a screwdriver then that is when you use it. Later when you have another task you make a judgment about which tool to use based on your requirements (your reasons), and so this time you don’t reach for your screwdriver but you grab your hammer and a nail because it is the better tool for this specific job (even though a screw might have also worked you figure the nail is the better choice for whatever reason). The point of this, similar to the previous paragraph, is that you may have several trading techniques (tools) that could work for you (even slight variations in methodologies) but based on your “reasons” you might find one method to be potentially more advantageous, and so that is the tool you use. Pick the right trading method based upon the specific variables of your potential trade. “Pick the right tool for the job” Near the end of this eBook I discuss the concept of having a “Holographic Mindset” for trading, which is related to the concept of “looking for reasons” (how’s that for a non-linear correlation to content within this eBook). Your job as a trader is to scan through your charts looking for opportunities to trade, supported by “reasons” (the more concurring reasons the better) why the proposed trade should have a high probability of success.