Play Both Sides With a Bilateral Strategy

Market exposure is a direct bet on market direction for most traders, but, surprisingly, guessing which way a stock will move isn't required in order to turn consistent profits. In fact, many patterns and setups work equally well in both directions, and it's often a flip of the coin whether they eventually break out or break down.

You can manage this uncertainty by utilizing a bilateral trade strategy that enters a long or short position, depending on the direction in which the trend finally develops. Realistically, this approach doesn't work with all type of patterns, because the chosen play needs to show ease of movement in both directions, as well as clear entry points.

To build a bilateral strategy, you also need to overcome directional bias when looking at a price pattern. Although you see it in your mind as a long or a short, that's often a fabrication created by greed or fear associated with risk-taking. In truth, many trades work with this approach, as long as you let the market tell you which way to go.

Start by finding a pattern in which support and resistance have contracted into narrow boundaries. Simply put, price breaking above resistance issues a long signal, while price breaking below support issues a short signal. Of course, the devil is in the details, and you have more work to do before actually risking your capital.

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Every trade setup, long or short, generates a unique reward/risk profile. In other words, the chart debris of old highs/lows and support/resistance, as well as their persistence over time, shows traders how much they're likely to win or lose on the intended position. Each side of a bilateral setup carries a reward/risk profile as well.