Anyone who tells you that they KNOW where the market is going is full of shit. You don’t actually NEED to know what it is going to do to extract money from it. What you need is an EDGE and a trade setup!
Beyond the setup, you need what I like to call a TRIGGER which tells you that a setup is worth placing a bet against. A trigger is the price action I like to see to confirm that it’s worth placing a trading bet against one on my Fibonacci price cluster zones.
Here is an example of what I’m talking about:
Recently in IBB (the biotech ETF) I saw what I like to call a trade setup. I saw potential support that came in at the 275.88-277.14 area. This price zone included the confluence of a .382 retracement of a major swing (January low to the August high), a 100% projection of a prior decline AND a 1.272 extension of a prior swing up.
IBB tested and held above this key support followed by a “trigger” that told us it was worth placing a bet against this zone. Besides the price work that suggested a possible low, I also had a couple of key Fibonacci timing cycles that were ALSO suggesting a possible low at the same time. These cycles are illustrated on the chart below.
This next chart actually shows a new trigger that I’m using called “RAF”. The pink arrows on this chart indicate the buy signals I’m using. I only use these if they show up for a buy when the indicator shows the market as “oversold”.
Bottom line, we had a reason to enter the long side in IBB. The initial risk was defined as below the recent low made on 9/12. At this point you can have a breakeven or better stop placed. Also, if this rally does continue to the target, we can look for the 305.70 area to be attained in the coming weeks. So the REAL formula for making money in this market is actually SETUP + trigger = trade entry and then you manage it!! I didn’t know where the market was going to go, but I did have a setup and THAT is the raw material you need to make money in this market!!!!