2 weeks later:
Combination of several factors for a very profitable trade.
here we have the combination of:
- Trend Channel
- Brake away gap
- Ascending reversal triangle
- Retest
As we have seen in the post before we have encountered a trend channel which is bullish. the channel has been hit on the upside which means that a short term (in this case several days) retraction is due.
so what we are doing now (and this is a real trade i made back then) we look for a great entree point.
After a few days we can see a ascending triangle formed. Charackteristically it has its starting point (with is another confirmation factor but not a MUST HAVE) from a brakeaway gab. We do not act upon potential breakouts of the triangle, and we do not act upon the confirmation of the triangel but we act after the retest (confirmation) and a candle pattern we recognise as bearisch (in this case a shooting star)
Please note that after the price brough through the down support line of the triangle we waited for it to touch it from the downside, then we waited abit more and after it retraced down and forming a shooting star candle-pattern we went in short.
The stop loss in this case was the down red line (which after our confirmation was a little bit more the 33 pips [including spread] and our target was the lower side of the big bullish trend channel.
even thou we went against a major trend we had several good factors and reasons to do so. act only after you found several reasons to act, one alone is never good enough.
So as posted before in a post the anticipated low was between 37 and 38$.
after it got hitted we waited for reversal signs to close the trade for a profit of 440 points/pips which is a risk/reward-ratio of 1:11.
with good analysis you can find awesome entree points which are highly profitable and you can go in very strong.
especially the combination of daily and 4 hours chart, several “reasons” for a action and price action analysis to define very clear and sharp entree points is a win-factor.
remember the steps: identify direction, identify possible reversals, spot patterns, wait for brake throug, act on retest.
Pivot points to identify a good entree point:
lately i have seen many posts about pivot points and most people telling how to use them… mostly in a wrong way.
Heres a right way:
in my trades i consider only 2 kind of pivot points and their supply/resistance lines.
- Monthly
- Yearly
everything below that is too short term to have any significant impact for good trades (short term to gain 20-30 points its fine, but everything above is unrealistic)
We use pivot points in the following way:
1.Identify trend (in this case trend channel as in posts above been said already beeing hit on the downside) which is up since beginning of april.
-
wait for confirmation that rent in the original (daily) trend channel is truly resuming his original bullish direction.
-
identify good entree points (in this case with pivot points and a “HAMMER”-candle stick formation)
after we had a nice short trade with a gain of 440 points we waited a few days to see if the price is truly reversing or if the price is only “fluctuating” around the lower line of the bullish trend channel. After it advanced a fe $ we had our confirmation that the bigger trend is resuming and the price is heading in a bullish direction again for the next few weeks/days.
Now: do not enter right now, always wait for a retest.
as you can see in this example the monthly PIVOT POINT is serving as sort of a “Neck-line” to the price. we see a deformed head and shoulders formed around the pivot point and as soon as it got broken to the upwards the price made great advances. many people would have gone long after the price made advances but that would have hurted them or their nerves a lot simply because price tends to retest. the same pivot point aswell served as retest and after the price made a down movement of 150 points the bullish trend resumed and we could strike in nice profit of 480 points (unfortunately i went out of this trade at 2/3 of its size and gained only 340 points or so as i thought a short term retracement is going to happen which then didnt).
it is the same game as before:
identify direction
wait for confirmation
wait for retest
act according to the identified direction
in this case we used the HAMMER candle stick formation to go in long after it touched the pivot point and made a move up (not on the pivot point directly) and we put the stop loss 5 points below the pivot point (overall stop loss 45 points risked)
if the price resumes and hits your stop loss then the entire idea has died and the price will continue to fall out of the channel. then a long position is suicide and the bullish trend channel has DIED and we need to make a new analysis.
So with this trade 45 points have been risked at a very crucial and specific and sharp point of the action and we got rewarded 480 points/pips.
This is how you use pivot points. you do not use them to identify reversals or a wall where the pricde MUST resume,. you use them as confirmation onto a developed trend and then you use them to IDENTIFY precise areas of a long/short position.
do not take those patterns too seriously. some of them are so rare that most people dont see them and if not enough people see them then they dont fullfill their purpose. never act only upon a candle stick formation but always upon several factors/“hints” onto possible future actions.
interesting info, alot of info to digest. the last 6 months, demo-account, i’ve tried trading using news. well, it doesn’t work for me. personally, you always need news to have some sort of feeling, but i need a different approach or some extra info to “feel” or learn the market. those trendlines are interesting, i don’t know if you can use it for daytrading, perhaps the small timeframes are the same as the long ones.
I wonder if Oil will struggle from this point on… or if the trend is truly re-established to the upside…
im long again. and i picked my long right out of the air in a perfect entree only based on this 6 months old trend channel. my minimum target is 55 after that im targeting 60/65/70/75. but my idea is that around 55 we have a turn downwards again towards 40. the other industry used commodities are not following ever since (copper, aluminium, platin etc.). they didnt make any upmove since oil started rallying (january) indicating that global demand (global production/growth) is not increasing.