The Art of Chart Reading: A Complete Guide for Day Traders and Swing Traders of Forex, Futures, Stock and Cryptocurrency Markets by Lawrence Chan

Author:Lawrence Chan [Chan, Lawrence]
Language: eng
Format: epub
Published: 2018-07-04T18:30:00+00:00

If You Must Pick the Start of the Second Swing

For the pause to stop at a particular price level and then resume in the direction established by the first swing, that price level has probably seen a bit of activity in the recent past. Thus, you need to identify that price level beforehand and wait for the reaction at that level. If price actions at the level you identified confirm your prediction, you can then hop in with a much better control of risk.

For example, the orange downswing in the middle of the chart identified a support level for you. When a second test of that level occurred (on the right side of the chart), it resulted in a strong reversal bar. At that point, you could hop in to go long, knowing that if you’re wrong, the risk is clearly defined as a price level right below the low of that reversal bar.

Obviously the probability of the trade working out in your favour would be lowered, because your prediction of a continuation of the first swing could be wrong. However, by strictly controlling your risk and having much higher profit potential, the overall performance would be comparable to the safe-entry method.

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