"Going up for a few days" is a sign of strength. Trend followers are looking to join the trend or add to their winning positions. Your bias should be long UNLESS something in the price action tells you the trend is going to take a breather, or possibly reverse. Let the opening 5 minutes give you a hint. The first 5 minutes CLF closes above the previous day's closing price. Sign of more strength. Go long, or if you only want to take a short position, then wait for a reason to short. Look at that 3-min chart again. You shorted after price moved ABOVE the previous bar's high. That's a continuation move, not a reversal signal. You thought price was too high, but the price action is telling you that buyers think the price is still a good bargain! Let the price action tell you what to do. You HAVE to honor your stops. The problem is that you got into a trade without a real signal and placed an arbitrary .20 cent stop. You were lucky that price came back to allow you to escape with a profit. DO NOT let that fact influence future trades! You will eventually get killed. "CLF cannot keep advancing" Why not? It advanced through the previous day's close, then through the previous day's high, then through previous resistance of 51.60, then through resistance before that of 52.98. Where is the next resistance level for it to test after 52.98? It's at 55.40. And it actually came pretty close yesterday. What if it broke through 55.40 yesterday? Do you know where the next resistance level is after that? 80.52 A lot of counter-trend traders thought AIG was too high on Aug 26th when it hit 36.00 because it was 13.00 earlier in the month and could not keep advancing. In 2 more days it advanced to almost 56.00 before taking a breather and many accounts took heavy losses on the way up. You don't want to play this game without honoring your stops. It's good you learned that there's no such thing as too low or too high. That can be your opinion, but as a day trader looking to capture short term moves, you want to follow the opinion of the crowd. It's fine to fade the opinion of the crowd, just make sure you have a real reason such as lower high/higher low. Learn to get into trades in which the price action actually signals a move in a certain direction. That way, if your stop is hit it's because a REAL SETUP has been invalidated. If you short a lower high and price reverses and moves back above that high, it's no longer a short setup and you're stopped out for a good reason. Think about this because what you did makes no sense. If your stop was 201.80 (perfect stop placement, too), why would you be willing to accept a larger loss? Previous support was broken at your stop price. This wasn't a bad trade either because AAPL was in a fairly narrow consolidation range on low volume. The big money would move it one way or the other. You chose the long side, and you also chose an excellent stop, just below the internal double bottom, and this was also a support level from earlier in the day. A break down of this price level would mean a test of the day's low. A breakdown would mean go short right away. In fact, when trading a consolidation range BEFORE the actual breakout occurs, you could place a double-size sell stop at that price, which would close your long position at a limited loss and placed you in the direction of the breakdown which continued to within .04 cents of the day's low. I don't recommend using a 1-min chart to find setups by the way. Maybe use it to guide your entries, but use a 3-min or 5-min chart to day trade with.
That bar at 9:48am went straight up on buying volume above the previous bar's high. That is a continuation signal, not a reversal. If you look at the next bar you see a doji with a high lower than the high of bar 9:48. As soon as that bar completes, you could short with a stop above the high. That would be a .20 cent stop with a purpose (if price moves back above the high, it will most likely go higher, and in fact later it does just that). So this is a top-picking short entry. It's not confirmed, rather it's a low-risk scalping opportunity that MIGHT turn into a reversal. It's what I refer to in my personal trading plan as a "B" setup: a counter-trend trade where you need to take profits or tighten your stop significantly as soon as the stochastics become oversold. A fast stochastic line reaches a full oversold condition @ 51.90. Take partial profits, take full profits, or tighten your stop to lock in at least some profit. I personally take full profit at oversold on a B setup, figuring I can re-enter if price action confirms further movement in my direction. Price then consolidates in a narrow range for 2 hours. The previous price action gives you a hint of which way the stock will break out of consolidation. If price couldn't retrace at least 50% of the initial move, it will most likely continue in the direction of the initial move when it breaks out of the range. CLF only retraced a small part of the move up when it pulled back, so it will most likely break to the upside and continue what it started. My mentor taught me: in a trend, always think continuation! A good trade would be to take a long position around 52.00 (bottom of the narrow range), with a stop below 51.85. If it breaks down and takes out your stop you can always go short. But the most likely move will be up and a breakout thru the high will fuel a lot more buying from shorts covering and breakout traders jumping in. You can see similar price action the opposite direction by looking at RIGL's 3-min chart Friday. Price fell in the opening half hour, then tried to bounce, but only bounced a very short distance and then consolidated in a narrow range for 2 hours. Chances are very high that any move out of consolidation will be a continuation of the down move because the bounce earlier was so weak. You'll notice with AAPL on Friday, the price action the entire day was pretty much a wide range. When it consolidated between 2:00 and 3:00pm which way it would break was anybody's guess. However, the fact that the 20-bar moving average was falling gave more weight to the short side than the long. OK, I'm off to hear some great live music. Talk to you later!
Thanks for your detail explanation, i know what you mean now. Actually CLF is slowly creeping up by midday, then push up in price. For AAPL, it has been falling for sometime. Then after i bought at 202, the price fall so fast to 201.2, i was just staring at the screen, too late to cut loss...thinking a rebound maybe coming, and too low price to sell, that's why cut at 201.5, after it bounce off 201.2. If using 3min/5 min charts, will it be too late to act compare to 1 min chart? The purpose of 3/5 min charts is to reduce the noise of the stock? Are you using simple moving avg or ema? Currently i'm using 1 min chart, bar chart, not candle chart, without any moving avg, not sure whether i can get used to 3/5min chart with the ema, that's why may not know what effect 3/5min with ema chart will have on me...
I use the 20-bar EMA. Using a 20-bar EMA is like training wheels; it helps you see the trend in your time frame. Keep in mind that so many traders use it for guidance to entries and exits that it becomes a self-fulfilling prophecy. A 1-min chart can be very noisy and misleading if you don't reference a larger time frame. If all you're doing is scalping pennies here and there, then a 1-min chart is fine. As I said before I use the 1-min chart to get me into a trade as soon as it sets up. Before I started referencing the 1-min chart this way, I would often hesitate, then not want to chase price because it already moved .20 -.30 cents without me.
I'm using 5 days chart but 1 min interval, so i can zoom out to see 5 days, but zoom in to see 1 day intraday, and all are in 1 minute interval, are you using 3min/5min interval or timeframe?
For stocks, I'm using intraday 3-min for setups and 1-min for entries. I also have a 3-day 5-min chart for reference, and a 120-day daily chart for major support & resistance levels. For ES & CL charts I use a 5-min intraday chart, and cross-reference a 2-week 1-hour chart and a long term daily chart. If I wasn't trading for a living, I'd be like Warren Buffet and use a 1-year weekly chart, cross-reference a 5-year monthly chart and come back in about 10 years or so to adjust my positions
Actually i think i better trade continuation uptrend or downtrend, those trend which shows not going anywhere i better not predict it will rebound or reverse, let's see next week, which is coming tomorrow - I'll try to honour my stop, good thing is i never average down last week. - Bad thing is i always thinking of shorting, which i need to change, i need to go with the trend - I'll watch for higher low, lower high - I'll trade uptrend or downtrend, not rebound/reverse Trading long period subject to overnight risk, that's why i prefer day trade, but sometime, swing trade few days can be rewarding, but now i seldom try swing trade