OK, in keeping with my philosophy of Trading Smart, NOT Hard, the first thing I'm going to say is that in the end, there are only two basic setups, no matter what anyone says:
1. Test - Of a previous high in an uptrend; of a previous low in a downtrend; and,
2. Retracement - A pullback in an uptrend; a bounce in a downtrend.
We can get fancy, look for large consolidation patterns and stalk breakouts as a third strategy (example is today's comments on NT) but let's not try that until we get #1 and #2 under our belts.
So what you need to concentrate on is finding either a test or a retracement set up, because the simplest way to make money is to take advantage of this statement:
The trend is your friend, until the end, when it bends.
This means we trade with the trend, ONLY in the direction of the trend, until it is over. At that point there should be a test of a high at the end of an uptrend (test of low in a downtrend), and from that we will know if it will continue, reverse or go sideways into a larger consolidation pattern. That is all that has ever existed, and no matter what kind of fancy name, funky indicator combo, whatever, this is the goal.
So when you come upon a stock, you want to know this:
Is it trending? Is it chopping? The use of ADX can help immensely in answering this question.
If it is trending, then trade the retracements, and every time it tests an old high or low, watch to see if the trend ends.
The concept works for every tradeable instrument on the planet, in all time frames. It is the fundamental principle of price action. There is no defying this.
So if you wish, I can help by looking at some charts together with you. For example, you might wish to find something and do an analysis of it. We can go over it, and see if I can give you some food for thought?
T. |
