<ul><li>DAX is an equity market index that tracks the performance of the 40 most important blue chip businesses based in Germany that trade on the Frankfurt Stock Exchange.</li><li>Some traders follow the DAX as a „tell“ and signal for US equities, as well, among other primary signals.</li><li>In the following DAX technical analysis video, and trade idea, I show an anticipation for a low probablity but high reward vs risk potential trade, whereby a support that many others (mainly trading algos) are watching.</li><li>When a support is broken, new bears start taking shorts, and previous bulls get stopped out. All of this means more selling. But when they sell, they need to sell their contracts to another participant. So who is buying? Mostly institutional firms, many of which see the retail traders as fish and themselves as sharks that want to eat them. The big sharks are even <a target=“_blank“ href=“https://www.investopedia.com/terms/p/paymentoforderflow.asp“>buying order flow data</a> from platforms like <a target=“_blank“ href=“https://robinhood.com/us/en/“ target=“_blank“>RobinHood</a></li><li>When most retailer traders see a support broken, they go short. many of the others that held on to their Long, sell and exit. This means that we can assume that new sell orders will be accumilating by the herd. Now, they may be right, and the might be wrong. No one really knows, and I do not know, either. But what we can assume is that those sharks have a temptation to take the chips from the fish, and, thus, are motivated to manipulate the price to the other direction. That other direction means to be a contrarian.</li><li>But do not get the wrong idea, this concept still goes against the trend. If buying pressure was so strong for a variety of reasons, then buyers would not wait for price to cross down the support. Buyers would be rushing in to buy, beforehand.</li><li>Accordingly, going against this trend implies that the probablity of winning in this trade is lower than 50%. Sometimes, much lower. How low? Nobody knows. This is where trading becomes a mix of an art and science rather than just art or science.</li><li>If a trade presents a relatively low probablity, then it must demonstrate a relatively high reward vs risk ratio. Otherwise, why take it?</li><li>Here is a situation, IMHO, that merits this concept, as I aim for a 4 to 1 reward vs risk</li><li>This DAX trade idea still allows a healthy room for the stop, as the following DAX technical analysis video shows</li></ul><p>Trade the DAX at your own risk and follow ForexLive.com for additional ideas and perspectives in <a target=“_blank“ href=“https://www.forexlive.com/technical-analysis“>technical analysis</a>. Last but not least, let me know what you think of the DAX or this trade idea in the comment section below, where possible updates to this technical analysis may be provided in the near future. Thank you.</p>
This article was written by Itai Levitan at forexlive.com.
