What a beautiful day for trading, and I did not have to sit at my desk long to see the perfect opportunity arise. This principle is what is known as a test in a rising market - see chart below. This is a 10 minute chart of the Dow Jones. The market had already made quite a nice high, and at 3.10pm the test appeared (see Point A). A test is when the professional money have driven the price down on the bar, found no interest in lower prices, only for the bar to close near the high. It should ideally be a down-bar, and the volume must be clearly less than the volume on the previous two bars. At the close of the bar at Point A I went long. The price broke through the resistance level (Point B at the level of R1) at which point I took my 20 pips profit.
Note: It is essential that you wait for the close of the bar. One minute before the close of Point A it looked particularly weak, as if it were to close at the very low, but at the last minute it closed near the high, giving a completely different picture. I've seen this happen in all time frames, even hourly bars, so always be patient and wait for the close of the bar before you make your analysis.
No comments:
Post a Comment