The Second Candle is the Key to Profits
Entering a trade at the right time has massive impacts on your returns.
You will see my trade plans always include when and where on the chart a trade should be considered.
A break above resistance or below support is usually required. Or a bounce off of one of these key levels.
These are prime set ups for A+ trades but the first move needs to complete before you enter the trade, and this is where many traders make a mistake.
If you enter too early you might end up on the wrong side of the action almost immediately.
Take the recent SOFI upside trade idea. Shares held at the anchored volume weighted average price (AVWAP) nicely, but a bounce higher was needed to enter the trade.
If shares break above 8.60 I like a continuation higher. (January 9th newsletter)
If you got anxious and jumped in after seeing shares hold up at AVWAP you ended up on the wrong side of the move as shares never closed above 8.60.
Shortly after the support at AVWAP was lost.
On the other hand, waiting for the second candle created a great set up and short trade for TTD.
On December 26th last year, the downside trade was called out after shares clearly rejected off of the trendline and then continued lower.
After the candles closed lower, the trade was on.
This short trade idea is absolutely crushing it and waiting for the clear rejection set up for a nice trade.
When you enter a trade at this point it is also a lot easier to see where your stop loss should be. For TTD a tight stop loss might be the open of the candle you entered the trade with. A little more wiggle room can be had using the trendline as the stop loss.
We’ve had a few great set ups recently for both MARA and HOOD and the requirements to enter these trades has almost been met.
HOOD is really close.
If you missed those trade ideas they can be found here.
The message here is, be patient and wait for the “second candle” to confirm a higher probability for your trade. Profits will follow.
And when you are ready for TrendSpider, please use the link below to sign up!
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I hope you have a great day of trading ahead!
-Nate
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.