“Most traders have a general idea of which trades were based upon similar concepts or patterns, but few have a system for analyzing those strategies and improving them…” When I first began to trade I also didn’t have a solid plan. I did notice, however, that winning positions and losing positions for setups that I attributed the same names to often had at least subtle differences in when and how they formed. These differences appeared to affect the probabilities and outcomes of the trades. They could either diminish the likelihood of success on the position, or they could diminish the potential reward for the trade when taken.
Additionally, some traits made my strategies much more successful in certain situations than they were on average.These characteristics, or building blocks of price development, seemed to fall into five categories… Pace The first building block is one that I call “pace”. Another word for it is “momentum”. Until I began teaching this component of price development in the late 1990s, most traders I came across had never considered it.
Once it was pointed out, however, the typical response was, “I can’t believe I never thought of that before!” When you are looking at pace in the context of a chart pattern, you are looking at how quickly the price of the security is changing over time compared to in the past.
Examining pace can help you determine not only the upcoming price direction of a security, but also how quickly the next move in the security will take place. It can help you identify when a security is most likely to fall into a trading range, as well as whether that trading range will break higher or lower. It can also help you gauge the speed at which a price reversal is likely to occur and how far that reversal can go before it stalls…
