Monday, April 11, 2011

The first two legged pullback of the day

If you could only trade one trade a day, the first two legged pullback is the best candidate. You should take out at least 1 contract at +1 and let the rest run. Usually, if the day is going to be a trend day, this is your best chance at leaving a stop at breakeven and getting most of the move. If your breakeven stop is hit, there is a good chance this would not be a big trend day.

A second option is to move the stop after every new high or low. So for example, after b34, you could  move your stop above b28, then move it above b37 when b38 makes a new low and so on. If you took some more off at a larger target, say +4, you could then move the stop only after 2 legged moves, so say above b56 after b64 made a new low.

On days that do not have a two legged pullback, well you dont need to trade since its possibly a hard trend day or a trading range day, which are not amenable to swinging.


  1. After b58 I was looking for a L2.

    This L2 never happened, but an A2. You also took an A2 last week that was an L1 (or H1).

    Do you consider A2 as reliable as L2/H2 in a trend?

    May be, if something (A2) looks like another pattern (L2/H2) it will behave like it...

  2. In this particular case, the A2 was indeed an L2. b58 ticked below prior bar and was an L1, b61 ticked above giving an H1 and then also an L2.

    You should also look at the overall pattern rather than just the last bar. This was a failed second attempt to break above the horizontal range from b42 to b53.