“What do you mean by let the market play out? I though you are bullish!” This is a common question I get from time to time from readers.
A lot of time, I tend to respond with “stick to your trading plan and let the market play out” despite I have formed a directional bias with my analysis.
For example, If I am bullish on Stock A based on the analysis of the characters of the price action and the volume, I will still consider the opposite case (or the failure case).
Some of the questions i would ask myself
1. At what point my analysis will be invalidated and turn bearish?
2. What are the characters of the price action and volume would I anticipate for a failure case?
My trading plan is to prepare for both scenarios despite it is very clear that there is only 1 scenario plays out at the moment. My trading plan helps me to react and execute according to how the market move, rather than to prove me right. It needs to help me to get out when the market doesn’t agree with me.
So, analyze the charts as usual and have your trading plan ready so that you will react and execute your plan accordingly and comfortably. Meanwhile, watch the video below to find out how I analyze penny stocks with pure price and volume analysis: