A quick vid on hidden orders / over extension! (live trade)

[Christopher 129]

 

 

[Ranajit Chatterjee 10]

So clean, nice one @Christopher Patterson

 

[Justin 264]

Very nice @Christopher Patterson! I was actually in that trade long, riding it to the top. That was my exit for the same reason! I should have reversed, but was happy to take my profits and be done. 
 

Well done; thanks for sharing!

[Christopher 129]

@Justin thanks! I was thinking about hijacking a thread and doing a video a day on one of my trades, it helps me, and I think there might be a couple people out there that would enjoy it, would that be alright? 

[Justin 264]

Of course! I'd enjoy watching them myself! You could even start it as a Journal in our journaling section if you'd like (but I'm not really fussed where you post it):

https://forums.bearbulltraders.com/forum/11-day-trading-journals/

[Clay Davis 2]

What might have happened if it weren't so over-extended?

[Christopher 129]

On 6/8/2020 at 10:31 PM, Clay Davis said:

What might have happened if it weren't so over-extended?

Good question  @Clay Davis! Lets think about it.. 

 

First, the following is my opinion...

There are a ton of different ways that this could play out, but in this scenario since there were SO MANY orders sitting at $20, the price is highly likely to bounce off of $20 a few times, and we will almost always get something that represents an ascending triangle. Now, by first principles we know that there is no such thing as a fixed price per share, price is dynamic, so long as there is volatility. So, by "wedging" price in to a fixed point, we're trending towards a contradiction. The market is saying, "THE SHARE PRICE IS WORTH EXACTLY $20" but we know from first principles that this can't be true! I like to think of it as momentum, the tighter the wedge, the more momentum accumulated, and ultimately, the more volatile the inevitable breakout.

So, we know 2 things, price is going to breakout to the upside or to the downside, it has to. 

scenario 1 (upside breakout)

1. Break with a continued buying effort

2. Break with a retest of $20

3. Break with a retest and fail of $20

scenario 2 (downside breakout) 

 

 

 

1. Break with a continued selling effort

2. Break with a retest of $20

3. Break with a retest and fail of $20

 

So, the main take away is that price cannot converge, there is no such thing as a "true value" of a share price, only a "perceived vale" and when we wedge we create a contradiction = > increased momentum = > breakout, In my video, price had no support beneath it, and so it's no surprised that it got hard denied, in the situation where price does have a lot of buying support, and we're approaching a strong level, we are trending towards a contradiction and ultimately, a breakout. 

Edited June 10, 2020 by Christopher Patterson

[Clay Davis 2]

Thanks a lot Christopher. very helpful.