You see the chart pattern or play but the action before does count. Take a stock that trades down off the open then consolidates forming a nice support line. This line breaks so the chart says sell it short. Seems like a high probability trade right? But what if its 12:30 pm? Do you think the fact that its lunch in NY will affect the probability of the breakdown being real? I do. Are you thinking this or just trading the pattern the same size with the same expectations and risking the same stop? What may be an 80% probability trade before 11:30 am could be a lower probability trade now.

Another example…. same move in the stock, same chart pattern, but this time the SPY was flat during the stocks down move but now has broke out to the upside, will this affect the probability of the trade and how you trade it? I know it will. Remember I am not saying that the pattern can’t play out exactly like you think it should just that the probability of that happening does change with the condition of the tape. If you get in the habit of really using the information the tape gives it can enhance your win loss ratio and help in your sizing of the trade. If the probability drops enough you will find yourself passing on some trades or trading them different.

What normally could mean a move with ease to a certain target with multiples of your risk as a reward may become a scalp. What seems to be an uncanny intuition by a top trader in actuality is them reading the tape with a more refined and skilled eye and using that information to adjust the probability and potential of the trade.

Jeff Davis @Shaq48_Trading [email protected]