The shallowest trendline from the prior day

There is a shallowest possible bull and a shallowest possible bear trendline every day. These trendlines have some predictive power as to where the price can turn and trend. For example, the shallowest bear TL from the prior day from HOD and b21 caused a reaction that led to a large move. If the final bar is the highest or lowest bar of the day, then you can use a TCL instead, which has lower predictive use.

Note that when the price gaps far from the prior day's action, the shallowest TL from the prior day may never be tested and you should not wait for it.

Small trend bars in a hard trend

When the first two bars have strong closes and very little overlap, it is reasonable to assume a hard trend is in progress. In a hard trend, any small bar can use used as a signal bar, especially if its a trend bar near the TL (b3). In a pullback, you can often enter above any small trend bar (b10).

Large inside bar on 1W

Inside bars are tricky and often require judgement to trade correctly. In general, large inside bars are overlaps and therefore a mini trading range. It is generally best to wait for the trade to trigger and take a pullback.

An outside bar that traps traders who did not see the reversal and entered (b23) makes an excellent signal bar if its not too large. If it does not trigger any small trend bar after it (b24) should work.

Waiting for chop to end

The day opened choppy from b1-8. From b8-11, bars suddenly had strong closes and shorter tails. This is a sign that the chop is ending.

When the chop ends, the initial move can usually be faded. In today's case, the initial move was a continuation up, which resulted in a large down move. If on the other hand, the move had been down, we would probably see a trend break up

Trading a choppy day

A choppy market is characterized by bars with large tails, occasionally interspersed with overlapping, opposing bars with large bodies. Its clear that the opposing bars are effectively a tail if you consider them in the aggregate.

Capturing large moves in this price action is very hard to do with a tight stop. The large move down from b3 only occurred after deep pullbacks and stopped me out.

There are ways to predict a breakout such as b29 but these are very hard to read. One way to keep yourself out of trouble is to wait for price action to be less choppy, i.e, you start to see more trend bars and less overlap.

If you must trade, deep pullbacks to the trendline are the safest and three push pullbacks are generally safe. Note that in choppy markets, you should always take an early profit and swing entries are hard to gauge.

Often, the mark of the successful trader is that he knows when the odds are against him and knows to sit out of the market when his expertise is not called upon. The trader who frets at missed opportunities is well advised to weigh against the missed losses and be content with making the right choice of staying out of the wrong market.

The openers: 1W (first Wedge) and 1P (the first pullback in a trend.)

The market often moves sharply on poor signal bars (b2, b9, b12) in three pushes away from the open. The initial move off the open often turns into a W like move (b1-b13)  and results in a potential trend move that usually takes out the other end of the W (low of b1). If the breakout is strong, the move may continue to another measure of the W (distance from b1 L to b14 H).

Often W setups are not clean (b14). When W setups are poor due to overlaps and tails preceding (b10-13), its usually best to let the W succeed (b15-16) and enter on a pullback (b18). The first pullback of a trend gives the best chance for a long swing that can be held till the trend terminates.

Since b3 is a trend move from an ib2 setup, b9 is a 1P setup as well, but with a poor signal bar. It is a good practice to wait for a second entry in such cases.

Openers: ib2

When the market opens, either it begins to trend immediately as evidenced by very little overlap between b1 and b2 or it forms the opening range. A market that opens with a trend from b1 can simply be traded as a trend by entering with-trend close to the trendline.

Usually, the first two to five bars represent the opening range and present potential setups that may lead to a trend move, i.e, a sustained move in a predictable direction that can be consistently traded for profits.

The earliest such a setup can occur is during b2, when an inside bar forms with either b1 or b2 having small tails. Today's case with both b1 and b2 being trend bars with b2 at one end of b1 represents the ideal case.

(My stop-limit-buy entry order triggered but was not filled as shown on the right because the market did not pause or return to the price)

When both b1 or b2 are not trend bars or are heavily overlapped, ib2 becomes lower probability and it may be better to pass on the trade. The chances of a large move after stopping you out increase when b2 is not a trend bar.

Note: This setup is still beta and its likely to be removed or changed in the future