My friend Matt Boeser on twitter says he has two rules, one is that you never trade your long side even if the short side is on, and another is that if you have a pair of swing highs and swing lows, don’t trade them together or over one another. The most common reason I think people trade swing highs and swing lows is so they can go over the trade line on short. Sometimes traders will trade their trade lines from the end of a swing. Sometimes even swing lows, but I guess that’s not always the case.
How can you tell if that’s a normal trade?
A trade is normal if traders aren’t buying or selling on the top and bottom, and they aren’t selling or buying at the top and bottom. If you see trading going on there doesn’t appear to be someone who isn’t doing what they are supposed to be doing, I call that abnormal trading, but in this case it’s not. Sometimes it really isn’t abnormal, and sometimes it’s abnormal trading! Sometimes there is someone who is just too crazy to play this game. It’s possible there is something behind the trade as well, like a person with something important going on. If they are taking an all-in in a market, they’re taking a little too much risk. If they are buying at the top, they are taking too little risk. If they are selling the bottom, they’re taking too little risk that it will take over the price.
In my opinion it is not unusual for someone to do these types of trades. What makes me think it is normal to trade swing highs and swing lows?
1. I’m a big believer in the concept of psychology, and if you look at a group of people, they all seem to do the kinds of things I think you wouldn’t want to happen to you. People who are obsessed with losing often trade at the top of the market, people who are fascinated by winning often trade at the bottom of the market. I think those are the kinds of folks who should be worried when they are trading and who should keep a close eye on what the market is doing.
2. I find it interesting that in this day and age when so many traders think they understand the market well and that they are “spot trading” that it is actually a lot easier to trade. You know your stuff, and I can tell you how a lot of traders think. But because of our technology, now we have all of these
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