Become A Master Of Few
Duke Heberlein is
still on vacation. Michael Brooks wrote this article.
Many traders could benefit from picking one or two patterns and trading those
patterns over and over again. Often, a trader’s inconsistency can be traced to a
sporadic trading style of jumping from one method to the next. It’s better to be
a master of a few patterns than mediocre at many patterns.
One simple pattern to learn is the descending triangle. This pattern appears
frequently and is usually noted many times by the “TradersWire” team
throughout the trading day. Below is an example of a post from today:
11:44:35
Intraday
Setup Alert
Ross Stores Inc. (ROST)
is forming a descending triangle on its intraday chart. ROST is down 0.05 at
41.29.
When looking at the above chart, notice the triangle formation and the
descending highs as the triangle moves into its apex (hence the name, descending
triangle).
One of the nice things about the descending triangle is it gives you a simple
way to estimate your risk/reward and determine whether a trade is worth
entering. I like to take the height of the triangle to project the move
once the pattern is broken. In this case, the height measures approximately 35
cents. This trade would be entered on a break below the lows of the pattern.
Because I always look for 3 to 1 risk/reward, my stop loss would have to be no
more than about 10 cents in risk, to meet my risk/reward ratio. If a logical stop
is beyond that point, then the trade is not taken and I move on to the next
opportunity. Remember, there is always a new train pulling into the station.
It only takes the mastery of a few patterns to make money. Between the
patterns you find on your own and the patterns provided by the “TradersWire”
team, you should have plenty of opportunities.
Until next time,