Learning to Day Trade - Part 18

Identify Trend Changes

The trend is your friend. I’m sure everyone has heard this saying at some point. Once a trend is established, it becomes much easier to trade. What I’ve discovered is: as soon as the trend changes, get in and go long/short depending on what the new trend is.

For this to work you have to be patient and not chase the new trend. Wait for the chart to develop and play the trend changes. If you can’t easily draw trendlines or the lines look too steep, then don’t trade them. It should be obvious.


On $TOPS, I first made a really dumb chase trade since I thought it’d squeeze and get up to $1.50 or so then top again. It didn’t, so I took 1c profit when it came back up. The trend was still in tact so I didn’t panic sell when it dropped. If I had noticed the first change to the upside I would have longed the breakout instead of chasing it that high. I immediately recognized this and knew it was a bad trade. Oh well.

A few minutes later, I identified another trend change based on the trendline I drew previously. The candle dropped really fast and I shorted when it came back up. I covered too soon but this trade was flawless.

$TOPS 1 minute candles

Next on $BBOX there was a huge spike/uptrend. I was unable to draw the uptrend on the 5m chart so that’s why you don’t see it here. It dropped and a new downtrend formed.

It changed trend again over about $1.52 and spiked into the premarket highs. Perfect. What you don’t see on the chart is it later dumped back to $1.46 at the open.

$BBOX 1 minute candles

Neither one of these were huge moves but these trend changes can occur on all stocks.


The next trading day (Monday) there wasn’t anything that crazy but there were some decent setups. $STAF had multiple descending triangles that worked perfectly. These pullback/continuation chart patterns work insanely well. So much so that there must be thousands of other traders drawing the same chart patterns and buying when they breakout.

I saw on Twitter that Roland traded the first entry that I marked. For some reason I rarely see people drawing these patterns when they post their charts. Maybe they don’t notice it and simply learned to recognize good entries.

$STAF 5 minute candles

Swing Trading



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.