Multiple Confirmations — A Key To Successful Trading
I cannot stress enough how
important it is to get multiple confirmations before committing
to a trade. As we know, trading is a risky
business. We must eliminate guesses and emotions from our trading to improve our
winning ratios. In addition to that, we should equip ourselves with
effective technical tools.
The chart below is a daily chart of Diamonds Trust
[DIA|DIA]. As you can see, the issue closed near the low with increased volume on July
6. A down day with high volume — I bet many traders would be expecting an ugly
Monday.
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Now, let me tell you about the optimistic
side of DIA. Although Friday’s closing
was weak, it was just above the bottom of a channel. This price level also
coincided with the 50% retracement level of the March 22 low to the May 17 high. If
the issue bounces from this level, we can experiment with a buy. Needless to say,
a breakdown from this level is a definite short-selling
opportunity.
Around 12:15 p.m. on July 9, DIA formed an inside bar on its five-minute
chart after hitting the low. In fact, this inside bar was a good buy point. By
1:50 p.m., DIA was trading one point higher.Â
Let me say again. Get multiple confirmations before committing yourself to a trade.