A few profitable trades that I've taken lately and the reasoning behind them.
Higher conviction ideas allows me to size my bets bigger. (more odds in my favour)
Hopefully others can benefit from and/or generate some other new ideas to share from it.
Trump /China G20 trade agreement.
- Market only gained 1% of this 'awesome' news..
- Clearly that's telling us that not even the best news in the world is going to take the market any higher, seriously what is going to top that news??
- This was a prefect shorting opportunity for almost any index and individual stock.
1. First, we know that the underlying fundamentals of the economy are bad and likely headed for a further decline so that's our core.
2. News comes out that the whole world/consensus has been waiting for and go 'Long', pushing the market up a measly 1%..
3. Now we look at the charts, US 500 daily first.
- Doji, Shooting Star candle, - Negative reversal signal.
- Price could even push up to or above old strong resistance, - Negative reversal signal.
- Stochastics are in the "Overbought" area on a down trending market, - Negative reversal signal.
Major trend lines are set so we have an idea for when to sell.
9EMA used as a guide that price is close to the mean.
I'm trading the futures on IG Markets and use the daily, 1 hourly for setups then trade on the 5 minute time frames.
I've got a gazillion S/R lines on IG and it's also a bit clunky to use so I'll explain the trade on investing.com's charts.
4. Next I look at the 1 hourly chart,
- We can see that the market ended up 'Bear Flagging' nicely in a big 200 point move to the downside.
- I wasn't awake for the first bear flag but I was ready for the second and third
Trend line drawn on the 1 hourly looking for a break to the downside.
5. Next on the 5 minute chart I explain my entries stops and exits.
In hindsight I probably would have waited for further confirmation candles after the first ' Pin Bar' sell but I was well in profit and happy, leaving 1/3 of the trade gave me the extra exposure for further potential downside.
2nd exit probably could have been timed a little better and I should have looked again on the bigger time frames to check that bottom (Black line) major support line was close or even a little higher than I had identified earlier in the daily chart.
Green candle crossing the 9EMA was my final sell out decision and the right time to exit now that I missed the bottom.
This same kind of Bear Flag setup can be used on any stock as well.
- I would first look at the market indexes to see if they are at the top end of a range and/or look to be peaking. (Stochastics will help identify this).
- This downward momentum will help even average trading ideas come to fruition from the sheer power of the overall stock market. (The same would be true for the big bounces, although there's always more velocity on big downward moves)
- You want to identify a stock that is also at the top end of it's range (or near) as this will have the most downward momentum (Gains) from newly positioned longs selling out.
- A stock that is already heavily oversold won't fall as far (percentage wise) as stocks that are at the top end of their range.
(20min delay)