Thursday, June 30, 2011
Chop: Barb wire
The most dangerous kind of price action is Barb wire. Barb wire is any three overlapping bars where at least one of them is a doji. This definition pretty much makes most of b20-b60 BW. Many traders lose their AM points trying to trade the lunchtime BW.
The correct way to trade BW is to not trade it. There were four failed trades in the region from b55 to b67. The first was a possible A2 short below b57. The second was a possible A2 long and failed A2 short above b61. b65 was a possible 2L pb after a breakout above a swing point. b66 was a possible second leg down from b62.
While they all would normally be OK trades, being in barb wire disqualifies them. Any setup can fail if its in barb wire, so you shouldn't get excited no matter what happens. The only time to enter a trade is when the BW stops being barby. At b70, we no longer had dojis and we had 3 pushes down to a failed breakout so its a possible failed breakout long. If b68 was a doji, then this would also have been a poor entry.