Here are couple examples of technical turnaround and failed technical turnaround trades. Once there is a possibility of a technical turnaround trade, it is possible that either of these strategies could trigger.
I have also included a Session High Low Strategy example, but the pattern didn’t quite fully form so there was no trade. In the strategy article, I pointed out that there are lots of potential patterns you may notice to take advantage of price moves near the sessions and highs and lows.
All these strategy examples come from the London and New York overlap period (8 AM to Noon EST) on Sept. 14.
Starting on the left, the price approaches the London session high, pulls back and then starts to consolidate a couple times but it never fully forms. So based on the strategies provided in the article, this trade almost sets up, but not quite. No trade.
The price continues above the high (horizontal blue line) and trends higher. Then we have a big down wave which erases a prior up wave. This indicates the uptrend could be in trouble. We have a possible technical turnaround (TT). There is a price swing, and a consolidation. The price needs to break out of the bottom of the consolidation to trigger a trade to the downside. Stop loss goes above the consolidation. Instead of breaking to the downside the price breaks to the upside! That’s a failed technical turnaround (FTT). Buy the upside consolidation breakout with a 2:1 reward:risk target. The trade works out well, +2 (you made two times what you risked, whatever that is).
Then there is choppiness with no trades because the waves are erratic and most stay within prior waves.
Later on we have a downtrend, the price starts to move up, but then falls to a new low. Since we tried to push higher and then fell to new low, this is a technical turn (TT) back to the downside. The price has a small swing, then consolidates. It breaks out the bottom of the consolidation signaling a potential move to the downside. 2:1 target target is place with the short entry. The trade quickly fails. -1.
Since the trade fails and breaks to the upside, there is a FTT trade. Buy with a 2:1 target. This is hit, +2. If that trade was missed there is a TT or potential reversal back to the upside as the prior down-move is erased by upward movement. The price breaks the consolidation for another possible long trade, +2. There were two trades here, but it was only possible to be in one (since the first trade was still going when the second triggered).
So there were three trades today using these strategies, during the overlap period. More if you traded for a longer period of time.
If risking 1% of the account per trade (see Position Sizing), these three trades increased the account by 3%.
The video also explains the trades.
By Cory Mitchell, CMT. Join me on Twitter @corymitc.