IMHO, I would have probably scrapped watching PGIC once that first candle became so bearish. The gap was up but that candle made it too range bound to bother.
Hey New Guy, I'm just going by your chart (I believe it's 30 min). I think Babak will agree... the first candle is quite bearish, although the gap was up. This kind of makes you wonder what the direction will be. I think for high % plays you want to have a nice bullish candle at the open to go long, or a small bearish candle that doesn't close much of the gap. With a large candle such as the first one on the chart, it makes for a hard time for the price to go either way, since there's now a mental barrier for the trader's watching at the high and low of that first candle. Hopefully that makes some sense
Thank you for your input. I assume you're talking about the last chart I posted? That was actually OSUR, not PGIC (although I did talk about PGIC in the post). So you're refering to the first candle on the chart, correct? It's a large downward candle (and yup, it's 30 min chart). I was toying around with the idea of only playing dummies where the first candle is either small, or in the direction of the trend. This is what you're saying, correct? Just want to make sure I'm getting it.... Thanks, - The New Guy
I think trading dummies set-ups such as that are a fantastic idea, at least until you get a few months of dummies under your belt. I would trade with the trend when the gap is in the same direction. I personally wouldn't go long at all on the chart you posted earlier, no matter what. It could be a decent short, though... but because the first candle almost closed the gap, you really don't have much reward to aim for in terms of risk. Now, on the other hand, had the first candle been a down bar, but only half that size or less.... you may have had a decent short. It all depends on many factors, including where you can put your stop safely and where the price will meet up with resistance (obviously on both ends of the 1st 30 min candle in your example). Good trading!
Great, I appreciate your thoughts on this trade. I think I'm going to take the first candle into consideration from now on. Thanks, - The New Guy
re OSUR and large down candles, yes I would tend to agree that that would put me off thinking of going long. I think there are, however, setups after such early morning action where it may makes sense to go long. For example, lets say you have a large down candle but then price begins to find a floor and it inches up with small up candles forming an ascending triangle - flat top and higher lows. Something like that IMHO would have a much better chance of exploding out and cutting through all that first bar resistance, than a one candle upturn. As Einstein said, make it as simple as possible, but not simpler. You should look for more than just 'the next candle' and see if it qualifies for an entry as per dummies.
Yes, for dummies I look for at least three candles. The first sets the range, the second (if it's an inside candle or reversal) sets the buy/stops, and then the third or a later one will trigger it. I don't know of any other way of trading dummies. I haven't been adding any other chart patterns to this, as I'd like to take less high quality signals than more imperfect ones. Has anybody else found some very reliable additions to this system? Thanks, - The New Guy
A while back someone asked about the possibility of 'dummy' entries for swing trades. Here's a good illustration of that: Notice how EXPD is going sideways at a time when the general market proxies are falling (August to October). Very good RS! Also notice the long term MA is almost perfectly flat and the other MAs lifting off one above the other in a perfect stack. They're not all as beautiful as this one but the same principles apply. Look for a strong stock, preferably in a strong sector (transports) watch how it behaves relative to the market, and wait for a 'dummy' entry so your risk is defined.