The blog focus today is upon setups that can be productive for a trader. All the trades have been removed, so you will focus on the "where" and follow the discussion as to the "why". Actual trades were recorded in our chat room.
All trades have a degree of risk, and a loss can be realized. Setup discussions should be practiced for execution and management, two tools you will need to be a successful trader.
FAILURES:
Failures should be regarded as an opportunity to enter a short trade. These will be found at support and resistance levels, and at the EMA.
- The S/R failure had two variations in pre-open trading: 1.) Price is moving in a narrow range to either side of the S/R, then breaks; and 2.) Price runs the S/R, then shows a pullback test. The test failure is a preferred entry if you missed the original run through the S/R level.
- The EMA failure should have a positive or negative slope. A flat EMA is not optimal for a failure. The first touches after a strong trend away from the EMA is preferred.
CHANNELS:
- Channels will be bullish or bearish. A sideways channel is referred to as a rectangle and is a break out setup.
- In the channel, long (reverse directions for a short) any pullback bar that does not reach the lower trend line, or any bar that touches at/near the lower TL.
- The width of the channel will restrict the hold time on the trade, i.e. a narrow channel usually is good for a point to 2/3 the channel width, whereas a wider channel can be for a point and use a runner.
- If in a trade, exit a breakout opposite to your trade.
TREND LINES:
Trend lines are similar to the channel. When identified, long (use opposite for short) any touch of the TL and hold until there is a break-usually a close- below the TL.
Those were the setups for the market today: short, short, long, short, long, and long.
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