Initial
Reverse After Price Momentum Divergence
IF someone was to ask me what I thought were the most typical
trade setup misreads - the initial reverse after a pmd would be one of my
first answers. WHY are you trying this trade - WHAT are the setup components
AND WHY should the trade continue?
I have a recommendation - find 10-20-30+ similar examples:
(1) see what your results would be IF you did every one of the trades (2) on
the trades that worked - see IF there is anything in common with these trades
that could further differentiate them (3) on the trades that worked - see what
the method base entry would have been AND the trade offs between a later entry
-vs- your results of the losing trades/missed continuation profits.
This is what I think you will discover: (1) your results will be a net loss
(2) the trades that are winners will typically have something in common which
will be the location of the pmd high-low. For instance - you have a 'down'
market AND there is a counter retrace back to resistance which also gives a
pmd AND that resistance point was also left side support. Now when you took
the initial pmd sell - you are actually selling a reject of resistance to
resume the left side direction (3) the trade off = avoided loser - 'later'
entry on winning trader - missed profits when you are flat for continuation
after the pmd fails. You will find that the trade off supports the decision
not to take the yellow dot setup.
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WHAT are the
setup components? I can see the dc dot shift and ttm reverse - 2 right
side indicator only components. I don't see a price line setup - nor is
there mex flow on a retrace into the trade. Further considerations: look
at the size of the buy swing AND your yellow dot trade would be right at
trailing support for that trade. I showed the dark blue line-dark blue
circle as the momentum extreme and higher low at the point - that is my
current hold area for the last trailing contract.
IF the blue
line-blue dot had occurred - I would have done that trade as a reverse -
trading into/through the first break of the blue line AND the dark blue
line. I would consider that trade as a swing failure after the pmd. In
this case - the trailing contract is still open at the last bar of the
chart. Something else to consider when you are studying your examples AND
thinking about the various trade offs - how many times is the trade entry
that 'shouldn't' be done - still available BUT as a 2nd break? The
situation then becomes - the first break AND the typical loss is avoided
BUT the same price is available as break2 AND that break becomes a winning
trade. |
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after the yellow dot sell - the area of the lower high into
the break becomes the center-focus line AND a key price to break and then
shift back to support to keep the buy 'going' The eventual short was a
break of the line AND then retrace to a lower high with mex flowing down -
the trade entered on the next break of the blue line AND into the triple
diagonal break at the 2 dark blue dots - this is the breakout potential of
the area the gave me the swing-failure setup after the pmd. IF still flat
the next setup that isn't that isn't a breakout chase - would be the
retrace-reject of the blue line - yellow line matched price break2 at the
blue dot. |
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WHAT are the setup components? I can see the dc dot shift and
ttm reverse - 2 right side indicator only components. To this I could add
that the pmd is at support AND this would be the resumption of the left
side buy. Do note that when I mentioned the pmd reverse trade winners AND
pointed out what I felt you would find that they had in common - that
wasn't to suggest that those were method setups after a pmd - this still
isn't a pmd-swing reverse setup.
IF the blue line-blue dot had occurred - I would have done
that trade as a reverse. Again note - I am showing what I would view as a
pmd-swing reverse setup that would be available at the same price BUT this
didn't occur and the pmd failed - continuing the sell. In this specific
case - I have a trailing short that was still held. |
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the swing high wasn't a pmd BUT IF it was - the sell could be
the same trade if the price movement was the same. The dark blue line is
the key to shift to support for the buy. Note the price action at that
line at the blue line: hit1 retrace to lower AND back to the line with ttm
reverse - hit2 retrace to another lower high WITH a dc dot shift AND with
mex flow down. When this trade is done - the entry is through a setup
price line AND a triple break setup.
The sell gets p1 and a reduce p2 as a response to the pmd at
support - the trailing contract remained open. After the pmd-ttm reverse
rejects the area of the sell break - there is a momentum resumption AND
the blue line break becomes a pmd-failure WHICH is a continuation setup to
our method AND in this case - is also a matched price failure which became
done as an addon.
blue dot sell: IF the red dot sell isn't done - this is the
first continuation setup.
yellow dot sell: IF you have never entered this swing AND/OR
are considering an addon - this is not a trade setup - you will be selling
a support breakout into the pmd. |
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