I’ve been reading a candlestick trading book and when I reached the end I was extremely disappointed. The book discussed the full range of candlestick formations, and the psychology behind them but it didn’t discuss how to trade the setups. No entry, exit or failure rules were defined.
After coming to this conclusion about the book, I realized this blog has missed an important step on how I trade. I blogged about an entry in ESG that was possible when it bounced above the count back line, but that isn’t a situation I have ever traded or will. The count back line isn’t intended to be traded this way. Trend trading isn’t about picking bottoms. It’s about joining an established trend, or joining an established trend after it has re-confirmed continuation.
Joining an established trend is an easy scan using MarketNinja or most scanning programs. I look for consistent separation of the short and long term Guppy MMA. I then look for an entry with minimal risk, which is close to our count back stop loss and provides me with minimal risk.
Joining an established trend after it has re-confirmed continuation (pullbacks) is about waiting till after the short term group has contracted, and indicators show the 3, 5 and 8 EMA’s are again separating. This provides more confidence that the trend is intact an entry is available at less risk than guessing the trend will continue.
Trend trading is about using our defined indicators to determine entry and exit of all trades. Using each indicator as its intended will provide the most profitable results. I hope to has some examples of each of these setups in coming blogs.
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