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[Trading Tip] Follow the Path of Least Resistance

What is the path of least resistance? This is not a term you would normally see in a trading book, but it's one that I use to help put the current price action in perspective.

Let me give an analogy that will explain what I mean by following the path of least resistance in trading.

Several years ago I was hiking in Rocky Mountain National Park in Colorado. As I was hiking a trail, about 12,000 feet up, I passed by a large waterfall. As I hiked along the path above the waterfall, I reached a bridge and paused to take some pictures. What caught my attention was when I looked away from the waterfall to see how it started.

It started as a small stream, meandering its way down, similar to the way a trend in the markets often starts, quietly before picking up steam. The water then starts to wind its way around rocks standing in its way as it continues to move downstream searching for the path of least resistance. As it continues along this path, moving around rocks blocking its way, the water begins to pick up some momentum as it approaches the start of the waterfall.  All of a sudden, it hits the top of the waterfall, moves over the ledge and there is a rush of water shooting down.   

So, you may ask, how does this relate to trading?

In trading, a trend may build momentum in a similar way, starting slowly, picking up steam, and then comes a sharp move like water cascading over a waterfall.

This is what markets are always looking to do, probing for the path of least resistance. In the forex market. This is why you see the focus often shift from currency to currency, constantly looking for the vulnerable point where it can push one side of the market a little bit, follow the path of the stream, push it around a rock, then another, and another as it builds momentum as illustrated in the following:


If you think in terms of markets being on a constant quest to follow the path of least resistance, it will give you a clue to what the strong side is to trade. It is then up to you to find an entry level, where to place a stop and potential target. Once you have that in place, then the market can do the work for you. The best way I know how to do this is by getting access to The Amazing Trader as its trading lines, as shown in the video, will guide you along the path of least resistance.

Feel free to contact me with any comments or questions.

Jay Meisler


Creator, The Amazing Trader



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