Technical Analysis Characteristics
When searching and evaluating symbols for trading the expectation is not finding a good trade setup. My head is cleared of other day-to-day thoughts and issues that require attention. I focus reviewing price charts looking for obvious reason that a trade would fail and lack of affirming attributes a trade would succeed.
A good trade setup is the only acceptable trade setup. Average trade setups yield average trading result and poor trade setups guarantee poor trading result. Average and poor is loss of money.
Good trade entry setups are always obvious on the price chart. Each attribute considered is obvious. No question or uncertainty remains whether a trade will follow through and profit. The trades are high probability to produce profit.
No trading is 100% success. A loss is inevitable. With effective use of reasonable trading and stop management the loss ratio for every ten trades should be one loss and one scratch. Higher loss rate per ten trades is incompetence. Beyond two losing trades every ten trades provides little or no profit. Beyond three losing trades is net loss in your trading account.
Minimum Obvious Affirming Attributes (SDCL) for Momentum Trading
1) Significant price trend upward or downward,
2) DPO or similar oscillator forms a divergence from price,
3) Clear formation of an important price pattern, and
4) Layering of the 50, 120 and 200 or similar moving average lines.
Trend Significance of Slow 50, 120 and 200 Moving Average Lines
Upward Price Trend: The 50, 120 and 200 (or 60, 120, 240) moving average lines have layered one atop the other during the initial long upward price movement. The largest MA line is on the bottom with each next shorter MA line atop the other. As price had continued its trend upward the vertical distance between each MA line increased. The moving average lines become farther apart.
Downward Price Trend: If price had been falling levitra 5 mg during a long downward price movement the largest moving average line is on top. Each shorter MA line is layered beneath each other and below the 200 MA. As price had continued to trend downward the vertical distance between each MA line increased. The moving average lines become farther apart.
If a longer MA line is near current price that MA line can behave as price resistance or price support. If price falls from above and the MA line is sloping upward that MA line is support. If price is rising and the MA line is sloping downward that line is resistance. On any chart they are considered fuzzy, not absolute discrete price demarcation.
Significance of the Fast 14 and 20 Moving Average Lines
These two moving average lines are used together. They are an indication of shorter trading sentiment and as price movement within a trend. If price has moved upward or downward quickly they are typically far below or above current price. Their distance above or below current price provides information of how far and how quickly price extended in a direction. The rate price ascends or descends during its recent price movement can be better visualized by both the vertical and horizontal distance between recent and current price to the 14 and 20 MAs and by separation between the 14 MA and 20 MA.
Momentum Price Reversal Trading
Technical analysis for reversal trading is discovering a price area where an upward or downward trend has ended and begins to move an opposite direction. Momentum is how quickly price should travel and how far price should travel.
For momentum trading reversing price requires:
1) Sufficient change of buying and selling sentiment,
2) Recent price history that appears logical, structured and organized,
3) Price movement that has over-extended it current trend direction,
4) Reasonable force to move price quickly opposite the recent trend, and
5) That Price has sufficient distance to travel.