Learning to Day Trade - Part 17

Trendlines

Drawing trendlines on your chart is very important. Not just support/resistance lines but drawing lines connecting tops/bottoms of candles to form a trend. This can give you a decent idea of where the stock is headed when it breaks the trend. It will also allow you to easily spot different triangle patterns that lots of people trade. When it breaks out to the upside of a triangle, buy. And do the opposite when it breaks to the downside.


Today on $GBR there were multiple different flags and trend changes. I will go over each one individually. These are 5m candles because on the 1m there is way too much noise. I now mostly follow the 5m chart and only reference the 1m early in the morning to see what’s going on.

  1. Small dip at the open followed by a curl up and red to green breakout.

  2. Short pause that ended up being a red candle followed by a continuation. This setup is known as a “red bar ignored”. Several big green candles in a row followed by a red candle. Buy the next candle if it breaks the high of the red candle.

  3. Classic bull flag.

  4. Classic bull flag.

  5. Classic bull flag.

  6. New trend starts to form. In real time you would not know if this was another bull flag or a top. The candle lows are below the 9 EMA so that could be one indicator since all of the previous ones were all outside.

  7. Downtrend starts to form. Would not want to be buying here.

  8. Triangle starts to form.

  9. Buy the candle that breaks out of the triangle. Sell 1/3 or 1/2 position just below the resistance level that was formed in the down trend. If it ended up breaking to the downside, short instead.

  10. Another bull flag forms. Buy the first candle to make a new high, or ride the remaining shares from #9 up towards high of day.

  11. Support ended up forming and holding the previous drop level.

$GBR 5 minute candles

I ended up paper trading this and the circled entries/exits are my trades. $3.90 ended up being the high of the initial push so my exit was nearly perfect. I paper trade with 100 shares currently so it is realistic for when I use real money. If I had taken 500 or 1000 shares, selling half into the first push with a stop at break even would have been perfect.

Entry: $3.64
Exit: $3.88
Profit: 24c/share

In the morning I had TWS open with my live account and I did not draw any trendlines. That would have helped me find ideal setups to trade with real money.

Basically, DRAW TRENDLINES. THEY HELP.

I feel like I’ve always known they were useful but never drew them in realtime, until today.

Update

This stock was possibly manipulated by MintBroker buying up most of the float ($MTSL and $AWX as well). The patterns are still valid, but don’t expect to get ridiculous gains like this on each setup.

Identify Trend Changes



Disclaimer

I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.