Signs You’ve Found a Good Candidate for a Swing TradeTo succeed with swing trading, you need to know how to read market indicators. Make a swing trade that’s more likely to yield good results by getting to know the following signs of favorable conditions. (Just keep in mind that no trade is a sure money-maker.).
May 03, 2018 There are many ways to read a chart. You can use Japanese Candlestick Patterns, Renko, Bar, Line, Heikin Ashi, Point & Figure, and etc. Because it’s easy to learn — and it works. That’s why I’ve created this monster guide to teach you everything you. Any technical trader's toolkit. Originally emerging in the early 18th century, candlestick were used primarily by Japanese Rice Traders. The use of candlesticks was later perfected by Soku Honma and ultimately brought to America Cby aStenve Ndisoln ein 1s991t.ick Pattern Reference Guide Bullish Trend Bearish Trend Open 'Bull' Candle Hammer.
The market is on your side. A rising tide lifts all boats. And before you buy, make sure the public equity market (for the country where you are buying the security) is in a solid uptrend. The industry group is on your side. Stocks tend to follow their industry groups up or down.
If the security’s industry group is a strong uptrend, chances are your purchase will be profitable. If you’re trend trading, buy on a technical signal or a breakout of a chart pattern: The stock should be entering an uptrend (from a chart pattern) or resuming an uptrend on a technical signal. Use the ADX indicator to determine whether a trend exists.
If you’re trading ranges, the candidate has just bounced off of support/resistance with a technical indicator confirmation. Watch for the technical indicator (an oscillator) to generate a buy signal. Divergences between your oscillator and the price action signal higher-confidence trades (for example, a stock falling to a support level while the oscillator, such as stochastics, traces a higher low and indicates underlying strength). The fundamentals back the technicals.
Pair your great chart setup with strong fundamentals. And no, you don’t need to spend 25 hours reading a company’s financial statements. Simply verify the important items, such as financial health, return on equity, P/E ratio, and expected earnings growth rates.
The stop-loss level is near your desired execution price. The best swing trading candidates are those where your emergency exit is nearby. The closer your desired entry price is to your stop-loss level, the less you stand to lose if matters turn ugly. But don’t place your stop loss at a level so close to the market price that a small insignificant move forces you out (as with most things in life, there must be a balance). You allocate the right amount to the trade. Loss is always possible, even with the best swing trading candidate. Set your position size in accordance with your trading plan, which should put an absolute ceiling on your position size and set a maximum percentage of capital you’re willing to lose on a single trade and for the entire portfolio (remember, shark bites versus piranha bites).Is the security a penny stock (hopefully not)?.Are you prepared to limit losses at the individual stock level?
Determine which precautionary measure you’ll take:. Set the position size based on the percentage you’re willing to lose (0.25 percent to 2 percent of total assets). Set the risk level as a straight percentage of assets and that percentage doesn’t exceed 10 percent of your total portfolio.Is your portfolio diversified? Make sure your positions are spread among different market capitalizations (for example, large cap, mid cap, and small cap), different sectors, and asset classes (not to mention domestic and international securities).Have you limited your total portfolio losses to 7 percent?
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Cover all your bases by confirming that. Each security in the portfolio has a risk amount equal to the difference between the current price and stop loss level.
The difference on an individual security level is tight — around 0.50 percent. The sum of those differences doesn’t exceed 7 percent of the total portfolio value. The stop loss levels are at a level representing a profit (barring a gap in prices, of course).Cut losses when your stop loss is hit — no questions asked.
Exclusive Bonus: Download the Forex candlestick patterns PDF cheat sheet to learn the characteristics that lead to profitable trades.In this lesson, we’re going to cover three of my favorite Forex candlestick patterns. I’m going to assume that you’re familiar with Japanese candlesticks. If not, you may want to and then come right back.By the time you finish this lesson, you’ll know how to identify these formations, what makes them so lucrative as well as the price structures to stay away from.I’ll be using the terms “” and “bar” interchangeably throughout this lesson. A pin bar or an inside bar can technically be called a pin candlestick and inside candlestick, but these aren’t nearly as common.Let’s dig in! Before we get into why these are so powerful, let’s first break down the components of the structure.The tail of a pin bar is also called a “wick” or “shadow” and represents the most critical element of the pattern.
As a general rule, the tail should make up at least two-thirds of the entire pin bar. Notice how the tail on the two pin bars in the illustration above are much more pronounced than the rest of the structure.Next is the body. The body represents the open and close of a pin bar and can vary in size. However, there shouldn’t be much space between the open and close.The first rule about the tail should help keep you in line. After all, if the tail is at least two-thirds of the candlestick, then the body should be relatively small.The nose of the pin bar, which is sometimes nonexistent, is important only as it relates to the tail and body.
If the tail follows our rule of being at least 2/3 of the entire pin bar, and the open and close are close together, then the nose shouldn’t be a make-or-break characteristic.Just know that the nose should be as small as possible, much like the image above. Why do I trade it?When it comes to Forex candlestick patterns, the pin bar is by far my favorite.Here’s why. It’s easy to spot when you have your chart setup to. It provides a favorable place to hide your stop loss.
The pin bar can be extremely profitable when correctly utilized. They are effective on both the daily and 4-hour time framesNow that you have a firm grasp on the characteristics to look for let’s get into a couple of examples.The first is a bullish pin bar that occurred on the NZDJPY daily chart. The inside bar’s range (high to low) should be engulfed entirely by the previous bar’s range, also called the “mother bar.”Another way of saying it is that the mother bar should completely engulf the range of the inside bar. So what makes the inside bar so lucrative?When it comes to Forex candlestick patterns, the inside bar is my second favorite pattern to trade.Here’s why. It can act as a profitable continuation pattern if it occurs during a strong trend. It provides a favorable place to.
A tradable inside bar doesn’t occur often, but when it does it can be a highly effective Forex candlestick patternHere is an excellent example of the inside bar in action. Notice how the inside bar in the chart above formed during a strong uptrend. An established trend is a requirement for trading this particular candlestick pattern.The reason for this is that the inside bar is nothing more than consolidation. So we have a strong trend followed by consolidation which leads to a breakout in the prevailing direction.Pretty simple stuff, right?The next chart shows two bearish inside bars that formed on the EURUSD daily chart. Note that the pair had been in a downtrend for several months, therefore these are bearish continuation patterns. Notice how the range of the engulfing bar completely engulfs the previous bar’s range.
Hence the name, this is the most prominent and significant feature of this pattern. As you can see, the pair had carved out a wedge pattern. The two bearish signals formed at resistance, creating two profitable opportunities.Know that the first candlestick in the chart above is also a bearish pin bar or at the very least a bearish rejection. It’s rare, but these two patterns can sometimes overlap.Always remember that a at a swing low is a sign of potential strength. It signals that the current downward momentum is likely coming to an end.Alternatively, a at a swing high is a sign of potential weakness. If you see one form in this manner, the chances are good that an increase in selling pressure is on its way.Last but certainly not least, both candlestick patterns must form at a key level to be tradable.
Otherwise, you may find yourself trading a lot of false positives. Final WordsWhether you trade using raw price action or some other means of identifying favorable setups, the three candlestick patterns above will surely improve your trading.As lucrative as these formations can be, always remember that there are never any guarantees. Just like any other Forex trading strategy, the three above can and do fail, so always protect yourself.Last but not least, the pin bar, inside bar and engulfing pattern are most useful when combined with other. By doing this, you greatly increase the odds of a successful trade. I was thinking the same thing as Rachel as well. Basically, your lesson above shows two types of bearish and bullish pin bars – ones where the body is “filled in” and ones where the body is “empty”. The question I had in mind was, does it matter whether it is filled in or not?So for the bearish pin bar example, you have it filled in with black.
What if it is the same shape but not filled in? I’m thinking that it doesn’t matter. If the body is formed below a resistance level, the tail still shows lots of selling – whether the selling was greater than the opening price of the body or if it was less shouldn’t matter; it’s still indicating a lot of selling above the resistance line. But I’m not 100% sure since I’m just learning this. Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information.
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