In market profile, the saying goes that 'Breakouts come from the middle'. What this means is that markets tend to find balance (trade at the poc which is essentially fair value) then breakout or break down from there. So essentially, you biggest chance of loss comes if you're on the wrong side of the market at fair value, not when you enter away from it. Hence the trading opportunity. I think such a strategy would work better for fading overbought markets than buying sell offs for the obvious danger you point out.
POC is Point of Control. In market profile, the POC is the value at which the highest volume was traded for the period. Where buyers and sellers most agreed on the value of the market. If you were going to trade the fade so to speak, you would want to see very low volume trading at the entry point, compared to the POC. If the POC intercepts with the price, the market is in balance and you need to exit. I only think this because in Nitro's thread he made a passing comment about volume filling the gap. This is classic market profile speak. When voids are created in the volume profile, they tend to fill before the market can continue its move.
it is touching SPY 113 for the 3rd time since June. i am thinking that it will be too geometrically perfect if it just falls back like the previous two times. may first violate 113 to the upside to trap breakout traders just to fall noticeably below 113 shortly thereafter.
tuesday spx range 1115.58-1127.36. wednesday range 1114.63-1126.46 looks like same seup that happened on july 14 and 15th. first posted some small red after much green. next day set a lower low and a lower high. the day after that the spx lost almost 30 handles.
History can tell ? This make me laugh ! See how the market react with all the bad news this week ? The market just ignore the bad news and go higher. The market mover for tomorrow will be the job report at 8.30am, but to be honest, if the report turn out to be bad, the market may down for several hours but will move up after that. If the the report is good, the market will gap up > 1130 in the opening and will move up straigh !! The reason is the bull don't want to give up and we don't have enough seller! Summary - Long win !