Trading Techniques  |  NOV 2004

The Market’s Second Chance by Donald Jones

Stocks & Commodities V. 22:11 (28-34): The Market’s Second Chance by Donald Jones In my STOCKS & COMMODITIES articles on auction market analysis (see suggested reading), I gave examples of making trades with value-based information. Implicitly, these were all “first-chance,” breakout trades. You do the analysis, the market meets the entry criteria and, boom! you initiate the trade. In the real world, we all sometimes miss that first chance. Most of us know better than to chase a trade. But on occasion, the market offers a second chance. Recognizing a valid second-chance opportunity is more difficult and takes more market knowledge than entry on breakout. Second chances can come in a variety of guises, but they have two general characteristics: • The initial breakout comes out of a congesting market condition, and • The second chance occurs during a subsequent congestion. If you’ve missed a great trade, don’t lose hope, because the market often gives second chances. Here’s how you can recognize them when they appear.

by Donald L. Jones