A Simple Way To Spot Setups
I often talk about the
importance of getting confirmations from as many indicators as
possible to improve your odds of winning. Today, I want to talk about the
opposite way of trading. I have a friend who has been daytrading for the last
five years. He uses five-minute bar charts and two kinds of moving averages.
That’s it. He says, “The simpler, the better.” Needless to say, he had
experimented with every single indicator known to man before settling on
his current trading style.
Here is his buy method (reverse for sell).
   1. Wait for a breakout above the 10-period moving average
high and the stock must close above the line.
   2. Buy as soon as the high of the breakout bar is taken out.Â
Let’s see an example.
At point A (chart above), MSFT broke
out above the average line and closed above the line. Point B is the buy entry
bar. You would buy as soon as the stock traded above the breakout bar (A). Points
C and D are another buy setup.
Let’s keep it simple and clear.