Hello traders. Suppose you spot an uptrend with several green candles with just one red candle in between. Do you count that candle as a trough or not?
A lot is made of chart features being as reliable as fingerprints or DNA or a chemical reaction in a lab. And really they’re nothing like this good.
A TA feature on a price chart is as good as what you want to use it for. So, assuming this is a trough you have been waiting for, what do you propose to do next?
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i agree with what tommor’s saying (and implying) above
also, don’t forget that it isn’t so much the colour of the candle that matters, as much as whether it makes a new higher high and/or low
don’t forget that a red candle can still be one that makes both a higher low and a higher high than the candle before it - and nobody’s going to call that a “trough,” surely?
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Since I am trend following I would need to know if there is a trough. Sometimes it’s hard to tell when it’s just one candle instead of a clearer pullback made of more candles.
OK, understood. I suppose there are two really good places to enter long in an uptrend -
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on a pull-back - this gets you in at a discount to recent prices and adds to the potential profit: if the trend continues for another 500 pips and you got in 50 pips below the prices around your entry time, you will get 550 pips
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on a break-out - this gets you in at a higher price than those seen around your entry point but you will have the reassurance of only entering when price is accelerating upwards: so in the situation above you might get only 450 pips profit, but it should be more secure and should be expected in a shorter time period
Both are valid, both are simple. Choice is a lot to do with how comfortable the trader feels doing each.
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How do you decide when to wait for pullback or breakout?
This is not the key question. Over 100 trades it is the set-up which makes you profitable, not whether you entered 100 times on a pull-back or 100 times on a break-out.
More important for both approaches are the questions - What do you do if you are wrong? - and - What do you do if you are right?
The usual answer to Q1 is to always set a stop-loss and adjust your position size so that a loss will only be a small percentage of your account capital. Q2 is more difficult, but the ideal (difficult to reach) would be to keep adding to the position and keeping the stop-loss at the same distance back from the last entry, at least until there is a pull-back.
So I suppose you could see this as a cycle - buy in an uptrend on a break-out, add as the trend continues, exit at the start of a pull-back, re-enter as the pull-back completes etc. etc. etc.
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I definitely agree and do proper position sizing. I was just wondering if you have a filter to when to use each method. Maybe if price runs away you wait for pullback and if pullback is small then enter on break out.
Not really these days. I am happy to enter on the first opportunity assuming a nice consistent trend.
I do like to see as many as possible of the other major charts for the two currencies are likewise also bullish or bearish as appropriate.
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What kind of strategy do you have, just wondering. And if how you approach the trough changes if you were scalping versus say swing.
I’m never scalping.