Tuesday, September 20, 2011

Early and late trend breaks



Early trend breaks are easier to spot correctly and the probability of them giving a sizeable trend move is high. Late trends are rather hard to predict and they will often go only a small distance or fail. This is why 1PB (b9) is a very vital setup to master. Catching the major portion of the early trend move allows you to relax and ignore the low probability setups during mid-day and optionally jump into any late trend break.

Late trend breaks are often very hard to spot and you will encounter may false starts such as the possible W at b40 or the second W at b55. The DP b22,46,49 was probably a decent signal, but the spike on b56 took out any swing stops.

The clearest and simplest entry for any trend break is a BP (b66). Even though it looks like the bottom of the range, a BP often is worth the risk given prior signals such as the failed W and the DP.

However, reading 1PB and OR are vastly easier than reading a breakout from an extended consolidation. If you cannot trade 1PB consistently, its unlikely you will be able to predict the BO from an extended TR consistently.

4 comments:

  1. Why would b6 be the 1pb in the bear trend from b1 to b5?
    Thanks.

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  2. JimJin, b8 is possibly a candidate for 1PB short, but once there is a second reversal, you should not look for a 1PB in the original direction

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  3. Hi cad,
    - is RVB b9 to large to be a SB
    - RVB b22 followed a doji - isn´t it a weaker signal then (it obviously worked out)
    - the same with b73 were it didn´t work out
    - are b51/52 opp. twins although they don´t have
    "nearly identical highs and lows" (as Al puts it)

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  4. b9 is a bit large, but for 1PB its normal to have poor bars. b22 is indeed a weaker signal and was followed by a deep pullback. b73 was possibly not a real signal bar (I need to edit the tolerances in the indicator)

    I have updated the indicator to write the signal type on top of the bar.

    ReplyDelete