Reminder: Not all pattern breakouts will challenge you. Some will and some will rally to price target. The ones that will challenge you are unavoidable. Your main motivations should be to cut losses on the failed ones and try to capture the most in rallying ones.
In a strong market environment, you win rate can be ıncreased by focusing on bullish chart patterns. But that's it. The metric that you can control and will make the difference for you will be $ amount you make/$ amount you lose on average.
Given that there are so many moving parts and uncertainties involved, my suggestion is to simplify your trade identification and focus on select few patterns that you are comfortable trading.
When I say comfortable: You have traded the same setup so many times that, you know where you are wrong, you know when the breakout will rally and you have a winner in hand.
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$BTC One last comment on this: Unless you are quick to reverse position, do not trade the breakdown from the recent #symmetricaltriangle looking consolidation. Given that we are very close to the apex, it will not behave according to text-book. (1)
So what should you look for? What is the sweet spot?
I will look for: If breakdown from consolidation, a possible sell-off and a reversal candlestick around 30K. A doji, hammer, bullish engulfing? If I see one of those I will weigh the possibility of a bear trap. (2)
If there is a bear trap, given that we are still above the year-long average, that will offer a great entry with a stop below whatever the reversal candlestick can form (BIG IF). Treat with care. We are already few steps away from current conditions. (3)
Btw, when I was managing funds in MENA, I was trading Saudi Arabia (bigger and liquid part of any MENA fund) and that was adding my work days to 6.
I feel for #cryptocurrency traders. You need some time to unwind, think, read & study. 7 days a week... come on.
For #cryptocurrency traders out there that are still in front of charts on a weekend, here are some updates for you, some well-defined ranges on select few:
$BTCUSD Rising wedge is still in play. 43K can become the target as a breakdown from wedge can retrace back to the beginning of wedge.
Edwards & Magee discussed H&S acting as a continuation chart pattern with a 1936 example. Somewhere in between, new smart authors, thought new generation chartists that H&S can only form as a top or bottom reversal. WRONG.
The next 3 tweets will show you that all you need is a clean chart (no indicators) a ruler and a pencil to identify a possible trend period to profit from.
Before we start, our template:
1 year of data on daily scale
Candlestick chart
(my preference white background)
When you open your chart you will see this. Are you able to identify the lengthy and sideways consolidation?
Are you able to draw horizontal boundaries that will be a well-defined rectangle?
Consolidations are usually followed by trend periods. We want to capture that.
Did you draw the boundaries like this? Do we have several tests?
I like to combine classical charting signals with the trend filter (200-day average). A breakdown should take place below the 200-day average and a breakout should take place above the 200-day average.
I.e. breakdown of the neckline will also clear the 200-day average.
Here is a good example where the long-term trend dictated the direction of the breakout. Failure to complete the H&S top and breakdown below the 200-day average acted as a great long signal with the breach of right shoulder high.
Edwards & Magee in their book Technical Analysis of Stock Trends, discussed the H&S failure with this example from 1936. Classical chart patterns are timeless.
For those who follow order books and see HUGE sellers at certain price levels and shy away because there are sellers;
Note: If there are no sellers there will be no buyers.
continued...
When a fund wants to build a position in a stock, the fund manager wants to be able to buy "enough" of the stock at reasonable prices, without pushing the stock higher.
A big chunk offered in the market is a blessing for the deep pockets to enter into position.
That is why when I see large amount of sellers at certain price (especially if it is a significant resistance on price charts) I'm more convinced that a breakout might be around the corner.