This is the chart I posted to open the thread. It should be clear that the mean was reached today. No need to post another chart since it's been only four days.
Ah yes, of course. Its still shocking how this works, and how trading less might actually lead to more profits. Your advice for traders needing to decide if they want to trade or they want to make money is proven time and time again.
Price has reverted to the mean. The easy money has been made. Whether it continues to the lower limit or returns to the upper can't be determined in advance, just as the amount of time it spends hugging the mean can't be determined in advance either.
I had a hunch this was the answer, but I'm seeing that I need to be told things over and over again so thank-you once again for such a perfect answer! Because of NoDoji's excellent advice to read that book on mindset, I know that I can learn this and eventually it will sink in, allowing me to make full use of everything that you teach.
Yes, it's incorrect. Your trend channel is drawn incorrectly, so whatever mean there might be is useless for trading. A reversion to a mean isn't going to do you any good unless you're looking at the same price movements -- and their means -- as professionals, such as the channel I drew in the first post (this should not imply that professionals necessarily look at channels; the channels are merely "footprints"). Once price reversed off that mean, then it's back to the balance between supply and demand. This morning, for example, supply had the upper hand, but soon after the open, demand took over and rose 35pts. Several people saw this trade but didn't take it out of fear. But that's a problem that's outside this particular approach. One can't profit from a trade he doesn't take.
Gotcha. I didn't have a channel drawn I just saw how price was trading to and from that line. Saw it as a potential place price may come back to. Today it just happened to work out that way. I get what you mean though. I anticipated that response but just figured I would ask. As far as trades I only took two one short one long. Thanks as always.
Price will trade back and forth across many lines, or points. That's what the auction market is all about. But unless you're scalping, all that is irrelevant. The trade was when price failed to hold 20 back on the 18th. After that, it was just a matter of holding until it reached the mean, as it did yesterday. Whether or not one wants to daytrade doesn't change the most probable direction: down.
A note that we are approaching the SL on the daily chart at or about 4040. If we can't get past it, the probabilities shift toward a return to the mean, which is now slightly higher.