Ignore the signals at your peril

Tom Williams often says "ignore the signals at your peril".  I did just that today and only managed to break even.  Below is a 15 minute chart of the Dow Jones, followed by a 10 minute chart.  If we focus on the 15 minute chart we see at Point A what we call preliminary buying.  As the market has fallen (and I was short at this point), high volume comes in, and the software has picked this up and given a green signal.  At Point B we see confirmation of this - a test/shakeout, at which point I closed out at took a 20 point loss.  However, on seeing the market's change of direction, I went long and closed out at a 20 point profit, so broke even overall.

Take a look at the second chart (10 minute), at Point A.  It was at this point that I closed out my second trade, and took my profit.  The bar at Point A has low volume (volume less than the previous two bars), as it approaches a resistance level (see the black line above).  Always be careful to watch what the market does at these levels of support or resistance.  If it approaches a resistance level on no demand (volume less than the previous two bars) then beware - this could be a sign that the market will turn around.  In fact, the next bar was down, but the bar after that continued up.  It can be annoying to watch the market go your way when you've closed out, but be happy with your profits.  There will always be another day.  It is caution and consistency that is the key to success.

Never try to tell the market what to do.  On my first trade I was convinced the market was bearish overall (by examining the daily chart), so even when signs of strength were coming in on the lower timeframes I chose to ignore them, thinking that the market will continue down.  The market may well be bearish, and finish down overall today, but in the meantime it will whipsaw, go up, down, sideways - this is how the professionals like to knock us out of the market.  So always beware, take notice of the signals, and use the utmost caution.