will eventually have a pullback. These trends have such strong momentum
that the odds favor a test of the trend's extreme after the pullback and usually
the extreme will be exceeded, as long as the pullback does not become
a new trend and extend beyond the start of the prior trend. In general, the
odds that a pullback will get back to the prior trend's extreme fall substantially
if the pullback retraces 75 percent or more. For a pullback in a bear,
at that point, a trader is better to think of the pullback as a new bull trend
rather than a pullback in an old bear. Bar 6 was about a 70 percent pullback
and then the market tested the climactic bear low on the open of the
next day.
The only thing that is as it seems is the chart. If you cannot figure out
what it is telling you, do not trade. Wait for clarity. It will always come.
But once it is there, you must place the trade and assume the risk and
follow your plan. Do not dial down to a I-minute chart and tighten your
stop because you will lose. The problem with the I-minute chart is that
it tempts you by offering lots of entries. However, you will not be able
to take them all and you will instead cherry-pick, which will lead to the
death of your account; you will invariably pick too many bad cherries. The
best trades often happen too fast for you to place your orders and that
means you will be choosing among the less desirable trades and will lose
more often. When you enter on a 5-minute chart, your trade is based on
your analysis of the 5-minute chart without any idea of what the I-minute
looks like. You must therefore rely on your 5-minute stops and targets, and
just accept the reality that the I-minute chart will move against you and
hit a I-minute stop frequently. If you watch the I-minute chart, you will