The Trapped Trader
When I say “trapped trader”, I’m not referring to just one trapped trader, but a lot of trapped traders in the same general area on the chart! My definition of a trapped trader is the trader who has entered the market with high hopes that the market will go in his favor, only to see the rug pulled out from under him really fast, with little time to get out. These traders may just have not had time to get out, they may just have blown a mental stop, or they were trading with no stop at all, or they may have figured that it was just a little “hiccup” in the market and price will bounce back soon. As the price keeps moving against them, they get more and more worried and scared that their entry was not such a good idea. The market has moved so far from them, and they are in the hole so deep, that they just can’t stop out and take a huge loss, so they just wait and pray to God that price returns back to the area of entry so they can get out break-even. And when and if price does get back to their area, guess what happens? They all rush for the exit to get out, causing a reversal in the price…..and that is where you want to place your order. You want to be going with their order flow. Generally, you want to be trading with the overall trend, and locate the areas where the trapped traders are, and have your order waiting there on a retracement of the overall trend. I think some examples will clear up any confusion.
The 1-2-3 Set-up
Be sure to double click on the small pic once at the google site.