Thursday, September 8, 2011

Large bars could turn into spike and channel.

The bar b49 can be read in many ways. Its possibly an entry bar below b48, which was an A2 short second entry (with b45 as first). Its possibly a failed H2 with b44 as H1. In any case, its a trap bar that results in acceleration of the trend.

When a disproportionately large bar pops from nowhere as is the case with news related events, there is a very good chance it will turn into a spike and channel type of move. The exception is if it was a trend bar that triggered off a 2-legged pullback and has follow through.

Once the spike is determined, wait for a pullback and trade only in the direction of the channel. The channel (b58-69) will be in the same direction as the spike (b49) unless the pullback also had a large spike in the opposite direction.

Channels typically but not always consist of three pushes and will give a W termination (b70) and will test the begin of the channel (b75). They will then go to the mid-range of the channel (b81).

There is a good chance you missed out on the spike but the pullback and channel often go to a measured move of the spike.


  1. Hi Cad,
    Would you be willing to do a post dedicated to exiting the market? It seems like the few losing trades you have, the loss is always very minimal, and the trades you decide to swing have a healthy run. It would be helpful to know your methodology.

    Thank you for your help!

  2. Eumaeus, A fixed loss such as 6t should be sufficient if the bar is well formed. I'm still experimenting with exits and once I have something quantified, I will make a blog post out of it.