like how do you know everyone else will not do the exact opposite of what you are anticipating and destroy your trade position?
You don't know for sure. But what I can tell you is that : "Everyone else doing the exact opposite" Is such a tail event that I bet it will never happen. So be reassured because that scenario won't be actualized. Otherwise. If it happens. Estimate yourself a lucky guy. Because it's not something that many can observe. It's like cosmic event that almost never occurs. But from an individual point of view ... I wouldn't want you near me.
This question is unnecessary if you've properly backtested your idea. If you have an idea u think is viable then there should be signs knowledgable traders are entering in the same area even tho they are often using different forms of analysis which arrive at the same decisions you are considering. The smartest of those knowledgable traders are focused on risk. Breakout from a small range bar is 1 way traders limit risk while simultaneously enhancing the ratio of risk to reward. The opposite of this is a large range bar where u often see price stall and pullback before anyone considers the risk to it's Low as tiny enough to be managable. U will be able to see the truth of this after u understand the importance of risk and u begin looking for these differences.
Good question! Everyone else is price. A tiny but well placed nudge can have a significant effect on how nearly everyone views what price is doing relative to what everyone was expecting price to do.
It's all about probabilities. I was anticipating the top in biotech, and was leveraging the hell out of the trade. But I got scared since the trend was still for the most part at it's climax, but at the same time trending higher. It's very scary to be short at the top of the market because you never truly know it's the top. And you also don't know how low the market will go after that as well. So the answer is, you never truly know. That's the hard part about trading. But I learned to just focus on probabilities, and limit the risk so that I don't blow up but can still earn a decent return.
" If you anticipate a trend or a reversal how sure can you really be that it will happen? " I think you have raised a very good question!
if you inherently understand the derivative your trading. You will realize the derivative has shaped the behavior of its participants over the years. If the participants are rigid, the derivative extracts invested resources from them and blows them out. So essentially have survivorship bias in the price pattern it exhibits. Eventually the survivors behave in a herd mentality adhering the patterns evolved. If they don't, they have learned from a historical perspective the pain it can elicit. So price patterns can be quite irrational but be the norm for that derivative. if what you tested gives you a indication of what most likely will happen, than the probability is you found a 'edge' in that derivative, and have become a member of the club of survivors. As a member of the club you will move with the herd and their inherent tendencies. the edge in any derivative is learning the patterns that have survived and engrained in the herd that moves the price.