Technical analysis based trading and investing focuses on price patterns and trends that were recognized in the past that suggest a similar outcome in the future. It’s that simple, but not always easy. A market environment can change or news can play havoc on the best of setups.
The most predictable trends and patterns are so obvious that they require little thought or analysis for the Master Trader. So why ever deviate from those predictable, simple setups?
We don’t have to and should not, but from experience I can tell you that it is what many do when those setups cannot be found.Then the less than obvious setups are traded. Having the patience and discipline to search and wait isn’t easy when starting out, but after “bucking the known” for a while you either learn and stop or may lose it all.
We can also look at other markets or tradable instruments to trade when what we are typically trading isn’t offering what we want. There are nuances to learn about various tradable instruments, but the predictable, obvious technical analysis concepts that come together are always the same.
Don’t fall for the hype of FOREX is the best to trade or Equity futures or Ag Futures or low priced stocks and so on.
As a someone that only traded stocks for years, the bear market that started in March of 2000 ended that after a couple of years of decline.
The Nasdaq 100 was down about 95% and many stocks were trading in single digits. In addition, the effect of stocks trading in penny increments or less than a penny verses factions just made trading stocks not worth the effort.
They didn’t move enough. So I started trading S&P 500 futures and it was great. Years later, when volatility contracted so much it no longer made sense to trade them, so I moved back to stocks.
Trade what trends and moves. If it isn’t, trade something else that is – Simple!
Let’s go over some “easy patterns” that you should always look for.
Predictable Price Patterns within Predictable Trends
The trend is up; higher highs and higher lows. The pullback was to an area of Major Support (MS), which will always mean the pullback was a deep one since it did not reverse and move higher at Minor Support (mS).
This puts the uptrend in question as to whether MS will hold. However, the retest pattern and Bottoming Tail (BT) candlestick pattern makes the setup obvious and predictable.
Predictable Price Patterns within Predictable Trends
The trend is down; lower highs and lower lows. Prices retraced to Minor Resistance (mR) where sellers are/supply. The M-Top and break below its support point made the retracement back to that area a predictable, obvious sell-short point.
Master Trader tip: the odds were high that the trend would continue there and that’s enough to act.
Predictable Price Patterns within Predictable Trends
In this example, the trend was up. Major Support had not been violated and prices had started moving sideways. Sideways moves within an uptrend assume higher prices. In this case, that didn’t happen and prices gapped under the support base then making it resistance.
The move back to that resistance (supply of sellers) was a predictable, obvious setup once the Topping Tail (TT) formed. This an example of a “Money Bar” play.
Master Trader tip: the TT was a completely green candle before becoming a TT, which tells us that sellers took complete control.
Predictable Price Patterns within Predictable Trends
Lastly, another predictable, obvious example of where prices “should” go lower. Prices moved up from a base and then gapped higher on heavy volume. As they were moving sideways, it is assumed they would move higher based on the prior price action.
They tried, but failed and broke below the support base created by the move sideways. That base is now resistance and prices have retraced back to that area where they stalled and have begun to turn lower. Time to sell short.
There are many patterns that can form, but trends can only be up, down or sideways. Predictable, recognizable price patterns – within a trend – that form in the right location – put the odds in your favor.
Master Traders combine trend, support, resistance and price patterns.
While these are all Swing Trading examples, the same concepts are used by Day Traders. Master Traders use multiple time frame analysis.
If you’re struggling to profit in the markets or just looked for high odds opportunities, take a trial of the Master Trader Advisory Letter.
All the best,
Greg Capra
MasterTrader and You Building Your Financial Future Together
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
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