Day trading setup recognition comes from continual exposure to repeated patterns, and with this repetition you begin to visualize and see the patterns as they develop-while they are developing. However, before this will happen, there must first be an understanding of the concepts behind the patterns and what makes them significant. There is also another issue involved, because regardless of how well you can find these patterns in hindsight, you ability to actually trade them will be dependant on being able to see this real time - instrumental to being able to do this is your focus AND what you are thinking about-processing real time.
Day Trading Setup Visualization - Study And Development My method of developing trade setup visualization - has been to add line drawings to the right side of an actual chart - those drawings being WHAT I would look for to occur for additional trading decisions. I then would have a series of setup-trigger scenarios - that could be compared to the actual chart AND with regards to what the actual price movement was AND how I traded that movement. Something that will become very interesting, and in turn very significant to your trading, is how few right side trade setup scenarios there really are, which of course is an aid in visualization-real time recognition. Trading then becomes a function of taking these repeating price segments AND making decisions based on how they 'fit' with the left side and current market conditions.
the key left side price specific at this time is the purple line - the left side channel/resistance continuation breakout. it is key in that it is current support at this time to the left side up swing - so in order for there to be further continuation to the red dot sell - this price will have to break AND shift to resistance. i will also be aware of the dark blue line as the higher low/retest of the purple line BUT these are essentially the same price. on a break of the purple line - the bottom dark blue line is the next target - the area of the chart reverse from sell to buy. in this area i will be watching for any 'next' setup to either be at the purple or yellow line and/or a setup that includes a break/failure of those lines. yellow dot: since i am short AND price is at left side support - i know where my partial target is BUT i also have to know what an exit of the trade would be AND consider the left side swing - i want to also know what a resumption-reverse back long would look like. IF price hits the purple line THEN retraces back to the yellow line - i would look for a higher low hold of the purple line as the 'start' of a exit-reverse setup. i don't like buying the yellow dot as what would be the initial indicator reverse - that trade would be a break right at what has become left side resistance/yellow line AND at this point also being lower than irisk to the sell - there also isn't an exit. purple dot: this would be the buy reverse - the break2 of the blue line AND you should be able to visualize that the retrace from the yellow dot break to the higher low would be with mex flow up - this setup is a break-failure setup of the yellow line remaining resistance. blue dot: consider the blue line/yellow dot testing-rejecting the yellow line AND then breaking back through the blue line - followed by the yellow line lower high - the blue dot is the first continuation trade done as a triple diagonal break AND this is the break-failure setup of the purple line remaining support.
purple dot: this is a first continuation trade to the red dot sell on break2 of the blue line - break1 would be a support breakout chase - you can take this trade IF: (1) mex is still flowing down (2) this setup is not into a pmd. the thing to 'see' at this time - is that you are trade trading the momentum-continuation of the initial break. yellow dot: this is an area for addon setups BUT the setup must include failure of the dark blue line to remain support. the yellow dot may be a break setup of the dark blue line as break2 BUT it's not a failure setup. don't look at the purple dot and the yellow dot and call them the same setup. yes they are both break2 of a line BUT consider this in the context of the red dot and the initial break2 into sell - the distance between the setup and the trade AND the momentum at the time. it would be typical for the yellow dot/dark blue line be a pmd AND at a pullback to left side support WITH a pmd - is a base mixed method trade. red dot2: the red dot is the failure setup - in this case a pmd failure AND a trade into the prior 2 breaks of the dark blue line - don't enter on a breakout of those prior 2 breaks WHICH would be a non-setup chase.
this is the actual right side chart after the red dot sell. yellow dot: there was nothing done at the yellow dot/initial indicator reverse back to buy - there is no setup here AND the initial short was still trailed for a hold of left side resistance at the yellow line. red dot2: resistance held AND moves back to the dark blue line WITH the momentum indicator flip - there is no trade setup here - there is nothing here to indicate failure of the dark blue line to remain support. the failure setup comes at the red dot as a triple diagonal break of the 2 dark blue dots - this was done as an addon.
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