If I ever get sick of looking over 1000s of charts every week, this will probably be the only type of setup I'll trade. Basically, it forms when 3 consecutive candlesticks are inside the previous days candlestick. A bearish setup occurs when the 1st and 3rd candlesticks close LESS than the open. A bullish setup occurs when the 1st & 3rd sticks close GREATER than the open. I normally trade them from the daily charts, but they can be traded off the intraday charts as well. When they are, you will find they are ALWAYS in some sort of triangle pattern. When traded, the best shorts occur when there is little support under the most recently identified support. Likewise, the best longs occur when there is little or no support above the most recently identified resistance. An easy way to determine whether or not a stock is trending up or down is to put an 8 period MA on the daily chart and you will see that the best shorts are taken when the price has rallied to a point of resistance and the 8 Period MA has caught up to it and is starting to roll over....opposite for longs. This concept is nothing more than an indicator to help in acertaining if there has been sufficient consolidation at a level for a move to begin. Trading is all about risk/reward. The 3 stick plays give you low risk entries and allows one to get high reward/risk ratios. The risk parameters are defined. When trading a bearish setup, you short on a move UNDER the 3rd stick with a stop set at the 3rd stick highs. When trading a bullish setup, the opposite applies. Here is one I'll be watching Monday. It's a bearish setup with a short trigger under $27.25.....initial stop set at $27.90.....intiial target at the upper gap.....$22.50.
Hi Margo-Trader, thanks for taking your time to write this journal I am finding it extremely interesting. If you would rather not post you p&l, would you be willing to tell us your risk reward ratio on all your trades and your win loss ratio, and your expectancy per dollar risked.
Why the obsession on P&L? It s the ideas and setups that are interesting. These setups are based on a tried and true ideas and it is up to the trader to implement money management strategies to capture and retain profits as they materialize, or effect stop losses. P&L would vary based on each trader's temperment.
yeah, lighten up. somone takes the time to post potential setups and all some folks can do is ask for more. id like to see more comments on the setups. like, i love NDN. i just closed my long position (scaling out) over $27 and i wouldnt short it (personal preference). but the set-up looks good and the p/e certainly isnt cheap. maybe the strength of margo's approach is she doesnt tweak it with findamental bias? margo, do you consider fundamentals at all?
Would your trigger points for CTSH be similar to those you used for JCOM , i.e. shorting at a break of the prior days low @ 67.53 with a protective stop at the prior days high @ 70.43 . Was wondering because that would be a pretty loose stop .
Bilbo, I typically take trades that have at least a 5 to 1 ratio. I'm not saying I clip that much every time because I don't. But, it's what I'm looking for BEFORE I establish a new position. Like every trader, I go through spells where I couldn't hit a bull in the ass with a boat paddle. It seems when I hit the wall like this it's because of my own doing.....for instance, shorting resistance when the stochs AREN'T in over-bought territory. I have never compiled a win-loss ratio and don't know the exact figures, but I'd guess it was somewhere between 80%-90%....closer to 80%.