Reactionary Trading – Every Big Move Has A Countermove

Catching A Big Move

It can be rather difficult to catch a big move, especially if it takes place outside of a breakout formation. In other words, an unexpected pump, or dump. This is where the idea of “reactionary trading” comes in. Essentially, this involves opening a trade after a big move has taken place. In other words, avoiding the actual move, but choosing rather to trade the aftershock. Crypto is well known for dumping hard and bouncing even harder. In the same manner, an enormous pump will eventually give way to a decent correction.

In many ways, these “reactionary” moves are easier to trade, and often provide quite a significant amount of confidence, as they often tend to behave as expected. As always, looking to the technicals will also assist in providing a fair amount of confluence for this type of trading idea. Utilizing this particular strategy is a great way to make up for missing out on a move. On the other hand, some traders choose to purposefully wait for such an opportunity.

In this particular case, it’s a trade by choice, and even strategically planned. There are so many ways to go about extracting value from the market. Creativity and design often play a hand in providing exciting and appropriate trading ideas. You will be surprised by how many traders only have one approach toward the market. As a result, they often mock others, as they are unable to understand that money can be made outside of their singular approach.

The degradation of emotional maturity within society as a whole is rather sad. However, it provides further opportunities for those who remain cool-headed and ignore the toxicity, often rooted in ignorance. Markets are often irrational. However, it is often a short-lived occurrence that takes place momentarily, just prior to returning to “the mean” of fundamentals and other underlying factors.

Finger On The Pulse

Remaining up to date with the multiple factors and indicators that govern price action is always beneficial, especially when markets deviate momentarily from expected outcomes. Understanding how a particular market should be behaving provides an advantage when for whatever reason, it doesn’t behave as expected. This ultimately creates opportunity. The uneducated will often interpret a deviation as a pivot or even reversal.

This is often how “Smart Money” suckers retail investors. For many, price action is the only thing they monitor. However, this is easily manipulated and unless you are knowledgeable above and beyond this aspect, chances are you are going to get caught off guard. Sometimes news events and other happenings cause the markets to knee-jerk momentarily, only to retrace or recover shortly afterward.

This is where this particular strategy can be extremely lucrative, especially with some modest leverage. Understanding why a market moves is sometimes even more important than the move itself, as it will most times provide an indication of what is most likely to follow.

Final Thoughts

This is an approach I often utilize, as it can be quite powerful, especially in the Crypto realm. Sudden moves to the upside or downside will always have some sort of reactionary response. trading these moves can sometimes offer higher probabilities than even traditional breakout trades. As you will most likely know, “fakeouts” often send traders in the wrong direction, only to trap them on the incorrect side of the market.

This particular strategy is able to provide a fairly high success rate and is always a tool I have ready in my trading arsenal. All the best as you endeavor to continue extracting value from the markets. See you next time!

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