Thursday, June 2, 2011

Failed A2


While an A2 in a trend is a reliable trade, they do fail and an A2 in a trading range is not really as high probability as an A2 in a strong trend.

An A2 is failed when it triggers, moves a few ticks towards the prior extreme and retraces taking out the stops beyond the signal bar.

When the first A2 after a breakout fails (b35), it is a strong signal of a failed breakout, no matter how strong the breakout may have looked a few bars ago. This is because in the absence of a trend, continuation trades are not really viable and you should look to fade breakouts.

Failed A2s in trends sometimes become WP if they are far away from the ema. A clear 2 legged move to ema (b28-35) should not need a third push and its generally safe to reverse above the signal bar. A fL2 (b36 and b38 ticked below prior bars) actually make this a bullish A2 and its an acceptable swing entry. During the lunch session swing moves are rare, so its ok to scalp part of such trades.

2 comments:

  1. I don't follow -- which bar is the signal bar? Re: your comment: "and its generally safe to reverse above the signal bar." Thanks.

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  2. Cadaver,

    Thank you so much for continuing to share your commentary (and impart your wisdom) on price action trading. It's such an incredible gift!

    I reread your post and studied your chart some more: b35 is the signal bar.

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