Bojack Horseman

Most technical analysis methods are rooted in one or more of the 4 key "principles of price action". 1. Markets alternate between range expansion and range contraction. Markets are dynamic entities that oscillate between periods of range expansion and range contraction. This cyclical behavior is rooted in the principle that prices, more often than not, tend to move within defined ranges. Recognizing the current range and anticipating the subsequent one is pivotal for traders. This understanding allows them to position themselves advantageously, whether they're aiming to capitalize on breakout opportunities or seeking to trade within the confines of a range. 2. Trend continuation is more likely than reversal. Another foundational belief in trading is the adage that "the trend is your friend." This underscores the principle that trend continuation is generally more probable than a trend reversal. Essentially, if a market is moving with a discernible trend, be it upward or downward, the safest assumption is that this trend will persist. However, the challenge lies in discerning when this trend might be on the cusp of a reversal, as no trend lasts indefinitely. 3. Trends end in one of two ways: climax or rollover. Trends typically culminate in one of two ways: either through a dramatic climax or a more subdued rollover. A climax, particularly a buying climax, is characterized by a frenzied rush where buyers, driven by a mix of fear of missing out and exuberance, are willing to pay almost any price. This surge of buying eventually exhausts itself, and with no buyers left, the market can experience a sharp decline. Conversely, a rollover is more subtle. It's when the momentum behind the buying or selling gradually diminishes, leading the trend to fizzle out rather than abruptly end. 4. Momentum precedes price. Furthermore, the principle that "momentum precedes price" is crucial. It suggests that before a significant price movement occurs, there's often a discernible surge in momentum. This initial burst, or "impulse" move, can serve as a precursor or early indicator of a more sustained move in that direction. For traders, recognizing and acting on these momentum shifts can be the key to capturing profitable opportunities in the market. The reason I primarily trade ADXpress and ADXtender patterns is because they are based on 3 out of 4 of these key principles. The scans target stocks that have expanded in momentum (rule 1 and 4) and pulled back/consolidated (rule 1), and then I buy breakouts for a possible continuation (rule 2). Rule 3 comes into play when it comes to trailing or taking profits. Trading doesn't have to be complicated. Why not base your thinking and strategy on core principles observed for over 100+ years?