Yesterday, a student asked me about the outlook of Nikkei in the 5 min timeframe. Personally for me, to speculate the 5 min timeframe is so much easier to do it than the hourly or daily because the bars are constantly moving like water. To win the game in index, one must have a game plan and think ahead of what's going to happen next. You can setup a trading plan, put your entry, stop loss and target prices, however the stock market is dynamic, there are no rules and you should just execute based on what you see and NOT what you planed! For me luckily, I live with the moment. If the moment is right, execute the trade. Trading plan is just secondary, there are mechanical, mundane and robotic which restricts your total flow of movement.
So yesterday around 11:04am, my reply to the student was "Nikkei will breakout and then back down!". As the minutes to hours started to unfold, Nikkei and the entire market started collapsing which resulted a concerted effort to wash off all the buyers who went long thinking the market was bullish. As I watched the story unfolds, only one thing came into my mind and it shall be the general rule of thumb for all speculation efforts. Execute a trade based on probability and not on confirmation. What you see maybe delusional and act on the opposing direction at the right time. So far, this rule had never fail me.
Ronald K - Market Psychologist - The Big Speculator
