Being a trader is very much like being a detective. Imagine you’re a detective who’s trying to solve a murder case… what’s the first thing you’ll have to do?
You’ll have to conduct a general survey of the crime scene, question the witnesses and try to determine the motives of the suspects. This will give you a general idea of how, why, when and by whom the crime was committed.
But that’s not enough to solve the case, is it? General ideas are not enough…
you’ll need to gather evidence to support your claims.
And so you zoom-in on the details of the crimes scene. You dust for fingerprints, test for DNA, and go though the video recordings before, during and after the crime was committed.
All evidence must point to the same suspect in order for him to be convicted of the crime. Without the evidence, you can’t solve the case.
But… what has this got to do with trading?
You see, profitable trading involves this exact same process.
You’ll first have to step back and take a look at the big picture: What’s the market trend? Where are the major support and resistance levels? What’s the outlook of the U.S. dollar over the next couple of weeks?
These are all questions that will give you a rough idea of where the market is headed.
But just like in the detective analogy, this information alone should not be convincing enough for you to take any action… you’ll need to zoom-in on the candlestick activity to confirm your suspicions before placing a trade.