ArbitrageTrades
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There is one simple mistake that a lot of traders are doing. They buy or short stocks that they believe will go in their direction. Unfortunately, in many cases they lose money and get out of business very quickly. Believing alone won’t help you to succeed in this industry. You need to understand the stock in order to trade it. You need to automate each your decision of whether to buy the stock or not and to know when to exit it.
Before we dive deep into the strategies or as we call in formations in this article, we need to understand why the stocks are moving into either direction and how to be on the right side of the trade. First of all, we need to understand supply and demand.
In many cases, where there is an oversupply of short sellers or long buyers – imbalance occurs. If it happens, you should expect a big move that will start happening after oversupply will decrease and the other side will start to prevail. The formations that are shown below show us how this is happening and explain how to trade such a move. If you start to automate your trading strategy by using following formations, the blind trading will disappear and you will be armed with the needed tools to have a successful trading career.
We recommend that you take a closer look at them and share it with your friends in the trading community to help them understand the principle that we described above and improve their trading performance. With all that said, let’s get started.
Formations for Short
1) Short on a parabolic move
One of the best formations with the very great percentage of risk-reward. If you see that the stock continues to rise in value without any significant decrease in price, you might want to start opening a short position. When the wash occurs, and in most cases it does, then don’t forget to close parts of your position with each meaningful decrease.
2) Shorting lower-high
When you see that each high price is lower that the previous high price, then it means that the stock will probably continue to fall.
3) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
4) Shorting the fake figure
In a lot of cases, when the stock breaks whole numbers or prices like 5.50, 5.80 etc. and cannot go above, it means that the fall of that stock is about to begin.
5) Afternoon fade
Sometimes the stock might be not very volatile at the open and can continue to trade passively for the first half of the day. However, in the second half of the day, activity might come by and the stock will begin to wash away. So don’t forget that the second part of the day is as important as the first one.
6) Green to red
In this case, the buyers of the stock failed to push it higher and that stock reversed and started to fall apart for the rest of the day.
7) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
8) Triangle or ABCD
Triangle is the most standard formation for going long. When a lot of buyers are keep purchasing the stock, then in one moment it will go up momentarily and wipe out the short sellers that were betting against such a move.
9) Higher-low
It’s a reversed Lower-high. If each lower price if higher than the previous one, the the stock will probably continue to grow until it breaks such a pattern.
10) Breakout
Breakout occurs when the gap between buyers and sellers narrows and one side prevails the other. In our case, buyers outsmarted sellers.
Hope this one was helpful. The material is brought to you by proprietary trading firm Arbitrage Trades.
Before we dive deep into the strategies or as we call in formations in this article, we need to understand why the stocks are moving into either direction and how to be on the right side of the trade. First of all, we need to understand supply and demand.
In many cases, where there is an oversupply of short sellers or long buyers – imbalance occurs. If it happens, you should expect a big move that will start happening after oversupply will decrease and the other side will start to prevail. The formations that are shown below show us how this is happening and explain how to trade such a move. If you start to automate your trading strategy by using following formations, the blind trading will disappear and you will be armed with the needed tools to have a successful trading career.
We recommend that you take a closer look at them and share it with your friends in the trading community to help them understand the principle that we described above and improve their trading performance. With all that said, let’s get started.
Formations for Short
1) Short on a parabolic move
One of the best formations with the very great percentage of risk-reward. If you see that the stock continues to rise in value without any significant decrease in price, you might want to start opening a short position. When the wash occurs, and in most cases it does, then don’t forget to close parts of your position with each meaningful decrease.
2) Shorting lower-high
When you see that each high price is lower that the previous high price, then it means that the stock will probably continue to fall.
3) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
4) Shorting the fake figure
In a lot of cases, when the stock breaks whole numbers or prices like 5.50, 5.80 etc. and cannot go above, it means that the fall of that stock is about to begin.
5) Afternoon fade
Sometimes the stock might be not very volatile at the open and can continue to trade passively for the first half of the day. However, in the second half of the day, activity might come by and the stock will begin to wash away. So don’t forget that the second part of the day is as important as the first one.
6) Green to red
In this case, the buyers of the stock failed to push it higher and that stock reversed and started to fall apart for the rest of the day.
7) Short the Gap
If the company issued some important news about its business, its stock will probably go one away or another on the afterhours or premarket. If you understand the news and think that the market understanding of those news is wrong and the gap that was created during non-market hours is meaningless, then you should think of opening a short position and risk management it carefully.
8) Triangle or ABCD
Triangle is the most standard formation for going long. When a lot of buyers are keep purchasing the stock, then in one moment it will go up momentarily and wipe out the short sellers that were betting against such a move.
9) Higher-low
It’s a reversed Lower-high. If each lower price if higher than the previous one, the the stock will probably continue to grow until it breaks such a pattern.
10) Breakout
Breakout occurs when the gap between buyers and sellers narrows and one side prevails the other. In our case, buyers outsmarted sellers.
Hope this one was helpful. The material is brought to you by proprietary trading firm Arbitrage Trades.
