
Thanks, options.
With this approach I'm looking for stocks which are
already in a clear trend and I just want a bite out of that trend.
As the old saw goes, "the trend is your friend till the bend at the end", so I want some of that action and will be out either when level 2 buy/sell pressures T&S, (what I'll refer to as Micro-Analysis), warn me of a possible end to the move
before it shows on a chart, or for the purposes of this thread when the chart tells me it
might be over.
As can be seen on the chart posted yesterday I shorted after the trend was established, if anything a little late, but that was when I discovered the stock.
What I am looking for is an ongoing sequence of candles in the time frame I'm trading - one minute in this instance - where the tops of the candles are lower, (in a down move), than the previous candle. This tells me that sellers are still active and overcoming any buyers before the candle can even get above the top of the previous one. Although the last sentence is not always strictly correct, it is in over 95% of cases.
In other words, in this time frame the sellers are still in control of the ball.
As long as that continues I'm keeping my position open.
It follows that once that pattern is broken by a candle rising above the high of the previous one, then there is a serious possibility that the move
might be over.
Time to close the position in full or in part and bank profits. Usually I close it completely.
In the example shown, Micro-Analysis indicated buy pressures mounting and selling pressures declining so I exited. As it happens that was the final candle before a bounce.
In the next post I'll talk about position sizing and ATR and after that about when to exit if the trades fails at or shortly after entry so any possible losses can be kept to a minimum.
There will also be more charts.
Richard