Preparing for a Winning Trade

19 Apr Posted by in Day Trading, Fibonacci Ratios | Comments Off on Preparing for a Winning Trade
Preparing for a Winning Trade

The two most important questions I ask myself when I analyze a price chart of any time interval to find trading opportunities are: trend direction (easy to see) and trend strength (critical to know).

Knowing the answers allows me to choose one of two basic trade entries. I can either trade with the trend when I see evidence of a strong trend or a weak trend getting stronger. Chart 1 shows how I was able to determine the Dow Jones will move substantially higher after breaking thru to new highs in July 2009 with a super-shallow retracement at the low C.

Proper chart reading can also reveal a market losing momentum as in Chart 2, a pattern seen with deep and deeper retracements. I easily employed my unique powerful Fibonacci extension method to short the market near the high as shown.

Of course, there are many layers of similar analysis that I perform to confirm again and again. I call these sub-layers of chart patterns Supporting Structures to back up the Dominant Structure, which will form a “Superstructure” pattern.

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Please click on the charts below to make them full screen.
Dow Jones Industrial Average


E-Mini  S&P 500