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This chart information suggested price was very likely to turn
lower at that supply level and that we should be the seller. The
combination is what makes this a high probability trade. The yellow
area below is a "demand" level. This was the nearest demand level
below the short entry point. The distance between supply and demand is
the "profit margin." The profit targets for this shorting opportunity
are the midline of the Bollinger Band (the mean, T1) and the demand
level (T2).
When price reaches a chart supply level, it pierces the upper
Bollinger Band, it might be showing a downtrend, and there is a
significant profit margin below, sell short at the supply level with a
buy stop just above the supply level.
Profit targets are first the midline and then the opposing demand
level. The opposite rules are true for long (buying) opportunities.
Successful traders buy at low prices and sell at high prices. Novice
traders buy at high prices and sell at low prices. Traders need to
spot the novice trader to attain low risk, high profits, and high
probability trades. Make sure that you sell to buyers who pay prices
that you know are too high, and make sure you buy from sellers who
sell at prices that you know are too low. This is proper trading is
done and you make more profitable trades.
No trader is right all of the time. The best way to prevent those
large losses is to stop out of trades that are no longer going the
direction you had traded. Your trade plan from several time frame
chart analyses; identifying supply and demand zones along with
resistance and support. Make sure to use trailing stops. No matter
what method traders select for setting their stops, the important
thing is that you do set them. You cannot be consistently profitable
in trading if you take large losses.
As a trader you need to learn the oscillator chart indicators like
the RSI (Relative Strength), the CCI (Commodity Channel Index) and
Stochastics. The oscillator anyone chooses to use is really entirely
up to personal taste, but you should never recommend using more than
one at a time purely for the reason that in essence all three do
exactly the same job.
While the RSI is formulated based on relative
strength of price, the Stochastics is instead based on systematic
higher and lower price closings. The CCI computes its results from the
change in price in comparison to previous price fluctuations. So,
while each individual indicator has a slight difference in its
calculation method, they all have the common thread of showing a
trader signs of when a market is potentially "overbought" or
"oversold," leading to some key potential opportunities to join the
current trend.
Traders need to know a uptrend is a series of higher lows usually
accompanied by higher highs in price. A downtrend, in contrast, is a
series of lower highs accompanied by lower lows. As traders, you are
taught to trade in the direction of the trend for your selected
trading time the trend ends, it
would be wise to exit from your trade before losses grow or profits
are given back. By using the previously mentioned definitions and
fully understanding trend, we can construct a strategy to place
effective stops.
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