An essential lesson that traders must understand is that every market participant, including big market makers, wants to make money at your expense. While this may seem obvious, it has significant implications that traders must consider.
Consider this scenario: suppose you had nearly perfect control over the forex market. What would be the best way to move the market to make a profit? Would you create predictable patterns, be random, or something else entirely? The reality is that market participants create patterns that attract traders, only to reverse the trend, whether intentionally or not. This is precisely what happens in the market, and traders must be aware of this behavior to improve their trading results.
Take a look at the recent chart example above, where the NZD/USD looked like it would continue its downward trend. However, notice the huge pullback on one of the candles. If you entered a trade based on the confirmed downtrend and put a stop loss at either of the red lines, you would have been stopped out, missing a lot of potential profit. A similar thing happened with the first uptrend on the left.
To avoid falling into this trap, set limit orders higher or lower than the apparent price action trend. Some people call this "stop hunting," but it can be used to your advantage. Sometimes the pullback won't happen, but that's okay. You don't have to enter every change in trend; instead, make fewer, smarter trades. By waiting for a pullback to the last major resistance/support line, you can avoid getting stopped out and work with the market instead of against it.
This concept is essential for making money in both binary and standard options trading. In the next post, I'll dive into this idea more deeply. If you have any questions or comments, please share them below.
Part 2 is found here
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