A large gap acts as a spike and if the price is very far from the ema, its very likely to pullback close to the ema. A 2 legged pullback to the ema is a very strong signal on a large gap day. The larger the gap, the deeper the initial pullback (b1-b14) and may look like a mini trend.
Just like a day that opens with a large spike bar, a very large gap day is likely to act like a soft-trend day with very shallow pullbacks. When the first higher low is a fL2 (b19,b22), its a very strong sign of an impending soft-trend day and you should never trade counter-trend.
On a soft-trend day, you can trade above doji bars (b42,58) as if they were bull bars provided they are close to either the trendline or the ema. When in doubt, you can always trade above a strong bull bar following the doji signal bar (b43,b59)
Could you please go into some detail about your stops and profit targets. Its something you have not mentioned on the site. Where do you place your stop at the beginning of trades and then how do you move them because your biggest losing trades seem to be only -1.5.
ReplyDeleteAlso how do you set profit targets, are they fixed for every trade?
Thanks
Omar
Omar,
ReplyDeleteIm moving to a system where risk is limited to 6t, and profit targets are +2,+4 and +8. I will post about this in detail.
How can we keep the risk that tight with the current market volatility? Looking forward to that post. Thanks
ReplyDelete