Predicting a HL vs waiting for confirmation of HL

Discussion in 'Technical Analysis' started by Daring, Oct 20, 2012.

  1. Daring



    Here are my thoughts.

    Either way there's a possibility to get stopped that goes without saying.


    The Confirmation Way

    Waiting for confirmation might stop you without the higher low actually failing, forcing you to re-enter, unless you place a stop below the higher low but that implies a bigger stop.

    Now is the confirmation offering a false sense of security considering you can still get stopped ? On the other hand, every HL holding, has a confirmation, so perhaps this increases accuracy.

    The Higher Low Prediction Way

    When price gets to the potential area of Higher Low, enter on red candle, aka selling, place stop on what would make the area fail. No confirmation, no sense of security, but only one try, the stop is potentially smaller.

    Please discuss help a newbie out.
  2. wrbtrader


    Newbies should post chart examples because that's one of the best ways to get other members to reply with useful answers. :cool:
  3. NoDoji


    I call these two approaches the confirmed entry and the anticipatory entry.

    Regarding a confirmed entry: Just because confirmation appears to indicate there is enough buying interest to continue the overall uptrend, it's never guaranteed. So if the logical price at which to place a stop loss is more than I'm willing to pay for the trade, then I have two optional tactics for entry once the confirmation price trades. One of these tactics involves a limit entry and the other involves a stop entry. This is a "second entry" approach. Sometimes the uptrend resumes with such power that there is no second opportunity to get in close to the initial confirmation price trigger.

    Regarding an anticipatory entry: In a well defined trend, it's a solid approach. The stop is small, the potential reward is large. I rarely use this approach as first entry though; instead I use a smaller time frame to enter on a 1-2-3 setup* off the key support level (trend line, 20EMA, prev R becomes S, etc).

    * 1-2-3 pattern: