August 17, 2011
- in Uncategorized by schooloftrade
When good Patterns go bad…easy opportunity for profit with Failures
Sometimes what you DONT see happen is the most important thing to look for.
The most important thing for a trader is consistency…watching the same things at the same times each day to see the pattern it forms. Then look for days when that never happens.
“The bus comes every day @ 830am…but TODAY it never showed up” Why? What is different about today?
Learn the 3 patterns first:
– Wave
– Breaker
– 2-Step
Practice watching the patterns consistently for 10 trading days.
Consistently = same market, same chart timeframes, same everything!
Breaker pattern is the most simple, so let’s start there.
When a breaker pattern fails (it does not break the swing high/low) then we have a 2-step pattern.
If the 2step fails it’s a breaker again.
When the wave pattern fails, becomes a 2step pattern.
In addition to looking for the failure pattern, we also look for these…
– Momentum overbought/oversold
– Tape Reading, lack of buyers/sellers
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Start with a 10-tick stop, then move the stop entry -5 ticks at my first target, then entry -0 ticks at my 2nd target, and then manage the runner.
Watch the video on our blog about trade management
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OPEN of the Day
– I use a 24 hour chart
– 12am start
– 12am finish
– So my open is at 12am est on the markets we trade.
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– Day Traders can focus on price action one day to the next. We don’t hold trades overnight, and we don’t need to worry about the macro/global news as much.
– Swing Traders need to have a lot more experience in understanding how the NEWS affects these markets. Holding trades overnight will also require more margin, and wider stops will require a higher risk tolerance. (same risk/reward ratio, but some people simply cannot stomach a 100 tick loss)
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How do we enter a trade?
– Fast Track = limit order (price guarantee, no FILL guarantee)
– Advanced Method = ‘Trap’ Entry which uses a buy/sell stop.
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Watch the video on the blog about our Morning Routine to learn more on starting your day correctly.
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– Market Order = guarantee your FILL, but not your PRICE you get filled with.
– Limit Order: guarantee your PRICE, but will not guarantee your FILL at that price.
– Buy Stop / Sell Stop: Limit order that turns to a market order when touched.
– MIT Order (stop loss) = becomes a market order if touched
