August 28, 2016

Decision points explained

Decision points are same for all traders
Decision points are price levels where day traders are expected to act. Most of the time,
these are levels where a demand and supply imbalance existed. My trading revolves
around these points and I expect the traders to act forcefully at these areas. These are
reference points to navigate the chart space. Day traders are creatures of habit and I
assume they act at these levels again and again.

Major Decision Points are

  • High, Low and Close of the previous day
  • Open, High and Low of the trading day
  • Major Swing Pivots.
  • Big Round Numbers
  • Range Highs and Lows

In fact these levels are implied support and resistances. I don’t call these levels support
or resistance because these words give a wrong impression that a support is a level to buy
and resistance, a place to sell. I always let other traders to fight it out at these levels and
try to join the winning team.

Do you know what is so special about these locations? These are markets own levels and
market is going to respect its own levels. There is no ambiguity or confusion about these
levels. They are very obvious and every trader notices these levels unlike the calculated

More people noticing the level means more people will act there. There will be a lot of
order flow here. Market always makes a decision here regarding its future direction. A lot
of traders are going to be wrong here. Their exit will create more order flow in the new

Which moving average? Which time frame?
For example, lot of traders uses moving averages to trade the markets. They identify
locations to initiate their trades in many ways. Some people enter on price crossover
and some others on average crossovers. These traders use different moving averages to
make decisions. This varies from 3 periods to 200 periods. Further, some of them use
simple averages and others stick to exponential moving averages. In short these traders
are identifying different locations to enter and exit their trades.

Decision Points on the other hand are fixed and visible to all the traders. There is no
confusion or ambiguity about the levels. Previous day high is the previous day high for
all. A Big Round Number is a BRN for all. So naturally there will be a lot of order flow at
these levels. Decision Point traders are united and they rule the divided rest.


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