Friday, September 18, 2009
Answering a question.....
GD asked a question regarding Point #1 from my 9-16-09 post (“Using structure to reduce brain chatter”). His question was, “Can you please show me a sample chart about your No.1 rule. Re: "In between this lines, I don't trade".
GD, since I can’t respond to you any other way (I don't have an email for you), I will do it this way in a post. I hope this helps. I am a mini-Dow daytrader who looks to buy pullbacks in a trend. The big question is...”where will it pull back to?” To me the best pullback opportunities are right after the break and retest of a known support/resistance level. That level thus becomes my “backstop” to protect my backside. It is the level that I expect price to not go beyond. If price does decide to go past the S/R level a little, it shouldn’t be much, or else I will see it as a failed setup and get out fast. The reason I tend to avoid (not always, but usually) any pullback that takes place BETWEEN the levels is because I no longer have my S/R backstop to protect me. Thus I don’t have as clear an idea of where price might pull back to. In an ideal situation I will enter on the break and retest of a level and use the next higher/lower level as the target for the trade. The two screenshots here show how a level that was created yesterday was used as an entry point today.