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