- The DAX is a stock market index that tracks the performance of the 40 largest blue chip companies based in Germany that trade on the Frankfurt Stock Exchange.
- Some traders follow the DAX as a tell and signal for US stocks, among other primary signals.
- In the following DAX technical analysis video and trade idea, I show an anticipation for a low probability but high reward compared to risk potential commerce, by which a medium that many others (mainly trading algos) watch.
- When a support is broken, new bears start to take shorts and the previous bulls are stopped. All of this means more sales. But when they sell, they have to sell their contracts to another participant. So who is buying? Mostly institutional businesses, many of which see retail traders as fish and themselves as sharks that want to eat them. Big Sharks Even Buy Order Flow Data From Platforms Like RobinHood
- When most retail traders see broken support, they go short. many others who have kept their Long, are selling and exiting. This means that we can assume that new sell orders will accumulate by the herd. Well, they can be right, and they can be wrong. No one really knows, and I don’t either. But what we can assume is that these sharks have the temptation to take the fish fries and, therefore, are motivated to manipulate the price in the other direction. This other direction means to be against the tide.
- But make no mistake, this concept still goes against the grain. If the buying pressure was so strong for various reasons, the buyers would not wait for the price to break through the support. Buyers would rush to buy, in advance.
- So, going against the grain implies that the probability of winning in this trade is less than 50%. Sometimes much lower. How low? Nobody knows. This is where trading becomes a mixture of art and science rather than just art or science.
- If a transaction has a relatively low probability, then it must demonstrate a relatively high reward/risk ratio. Otherwise, why take it?
- Here’s a situation, IMHO, that deserves this concept, because I’m aiming for a 4 to 1 reward against risk
- This DAX trading idea still leaves a healthy place to stop, as the the following DAX technical analysis video shows
Trade the DAX at your own risk and follow ForexLive.com for additional technical analysis ideas and insights. Last but not least, let me know what you think of the DAX or this trade idea in the comments section below, where possible updates to this technical analysis may be provided in the near future. Thanks.