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the trading book > deck 1 > Flashcards

deck 1 Flashcards

1
Q

what is necessary for a high probability trade?

A

a clear trend upward or downward

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2
Q

If the candelsticks are breaking what are 3 indicators to look at before taking a trade?

A
  1. the bollinger bands should be widening with slope,
  2. the sma’s should be sloped
  3. did the smi’s cross
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3
Q

what is the main rule with the smi indicator?

A

do not take the trade trigger unless the smi is over or under the 40 lines and has crossed

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4
Q

what are the three main things that make for high probability trades

A
  1. a strong trend
  2. 3 of the 4 indicators lining up
  3. good clean price movement
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5
Q

if slopes were on a clock face, what times should i be looking at trading?

A

between 12:30 and 2, and 3:30 and 5

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6
Q

how can you tell that there will be clean tradeable price action?

A

there will be clean easy to read 1st and 2nd support/resistance lines

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7
Q

trends are __________, sideways charts are___________.

A

forgiving, difficult

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8
Q

when looking to take a trade off of the 50 sma, what are 2 things to look for?

A
  1. a confirming candlestick directly following the bounce candle.
  2. it should be a higher high and a higher low then the pervious candle.
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9
Q

if you are in a long trade and make a lower relative high and follow that up directly with a lower relative low what should you do?

A

take most of your profits and look for the trend to reverse.

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10
Q

what is the highest probability trade when the candles move into the 50 sma from below in a downward trending chart?

A

a short. look for the downward bounce, and conformation based on candle action.

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11
Q

If you see a bounce off a bollinger band into the 50sma, what should you do?

A

look to take part of your position off, and watch the trade carefully, as a reversal is very possible.

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12
Q

what does a higher relative low signal?

A

that the trend is most likely reversing

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13
Q

what are the most logical stops based on?

A

support and resistance lines, and/or the 50sma

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14
Q

what are stops?

A

stops are specific regions triggered by support and resistance lines, and taken based on candle action

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15
Q

what should you do if in an uptrending chart, there is a solid gap up?

A

take some of the profit and raise your stop to right below the gap as it is most likely an exhaustion gap that will fill.

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16
Q

where should stops be set and move to, and why?

A

they should be slightly below the last level because there is normal retracement that occurs as most levels are broken. if you enter a trade at 1, and it moves to 2, you should not move your stop until level 3 is broken, and you should place it right under 2.

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17
Q

what are the ideal retracements we should see in a wave?

A

between 38.2% to 61.8%.

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18
Q

the deeper the retracements we see, ______________

A

the weaker the pattern

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19
Q

it is much better to take a long where, and why?

A

at the bounce of a higher low (than a break out of a higher high) because our stop will be slightly below the higher low.

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20
Q

what does a lower high normally signal?

A

that the wave is topping out.

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21
Q

if the mac historgram and the slope of the averages and candles are going in different dirrections, what does this signal?

A

a rare but strong jump in the candle direction.

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22
Q

if we are in a counter trend trade, what 2 things should we be doing at each level?

A

taking profits and looking to re-enter with test of the level. we should also be trading in smaller size

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23
Q

if a pennant appears in a trend, which way is the most likely way for the trend to break?

A

in the continuation of the trend before the pennant.

24
Q

when a pennant breaks, what is the most likely candle formation?

A

a gap up or down, usually up, that will retrace to the top of the pennant.

25
Q

If you take a long and hit your short, and then it hits your long trigger again, what should you look at before taking the trade?

A

did the chart make a higher low when it triggered your stop?

26
Q

if the slope of the 20 sma is steep, what does that mean for our trade?

A

that it will be reliable all the way into 2ndary support

27
Q

what does a long range candle tell us to do with our trade?

A

take some profit and move our stop up. do not completely exit the trade

28
Q

what does a topping wick on volume after a strong move upward signify?

A

it is a primary sign of resistance

29
Q

if you take a trade and the price starts to languish around, what should you do?

A

sit on your hand! if it has not hit your stop, do nothing. move away from your computer if necessary. trust in your pre entry decision and wait. focus on chart action only, not emotions.

30
Q

what is the most important thing to focus on while in a trade?

A

chart actions, not emotions

31
Q

what does it mean the longer a trend holds around a support level?

A

that it will resume the trend that the stock was in before it started holding the level.

32
Q

what is one of the strongest triggers?

A

the tripple cross of the 8,20, & 50 sma’s.

33
Q

how many candles should you be looking at when looking for information?

A

3, never fall into the trap of looking at one unless it is a long emotional candle or a gap. then look at gap rules

34
Q

if a chart begins to pull back, what should you be looking for?

A

if it holds your first level of support. recall that it is normal for a chart to retrace to the 1 and sometimes 2nd fib.

35
Q

where should your final stop be for a trade?

A

the secondary relative support break

36
Q

what does the break of a major support level that is at a main price level dictate?

A

that the trade is over, exit immediately

37
Q

you should use your main chart for determining _____________, and one chart down for __________________.

A

support and resistance levels, entry and exit triggers

38
Q

if a trending stock breaks its 15 min opening high or low, what can we expect?

A

it will continue in the direction for the rest of the day

39
Q

if we are using the 15 min rule, where should be take the trade?

A

at the retest of the 15min high or low

40
Q

what are the 2 caveats of the 15 min rule that we should look at before taking the trade?

A
  1. the chart is loosing momentum in the shorter time frame chart, and the sma’s are flattening.
  2. one of the major sma’s stand as resistance or support
41
Q

if a chart makes a 15min high, and drops down below it, what do we need to wait for to take the trade?

A

wait for it to break the 15min high, and then retest it. take it on the bounce of the retest.

42
Q

what should we use to draw the fibs on a 15 min breakout event?

A

you can use yesterdays high/low to to the 15 min candle.

43
Q

when are gaps usually filled?

A

in the same day they are created, sometimes it takes up to 6 days

44
Q

what is the one time that gaps usually do not fill?

A

a continuation gap; a gap that is created with significant momentum and signals a new move in the direction.

45
Q

what is the important thing to look at before taking a gap trade?

A

what was the pre market volume? if it was unusually large, the chances of the gap retracing are much less.

46
Q

if the gap in in the direction of a strong trend,what should we expect?

A

around 50 to 61% retracement with a continuation in the direction of the trend.

47
Q

in a gap trade, what are good places to look for the stock to retrace to?

A

prior resistance and support levels, and the prior days close.

48
Q

what should you look for as your trigger to enter on a gap trade?

A

candlestick reversal patterns at prior resistance or support

49
Q

gaps in the dirrection of the overall trend usually drive ____________ and ___________. we should ___________ ___________ out

A

price and volume, seek them

50
Q

if there is no strong trend, and a stock gaps, what should we expect?

A

the gap to retrace. the less of a trend, the more likely and less time a gap will take to fill

51
Q

where is the appropriate place to take a gap trade, especially in a sideways trending stock?

A

at the retest after the breakout

52
Q

when should we look to take profits in a sideways trending wave gap trade?

A

immidatialy at our first target

53
Q

if we choose to trade in a sideways trending wave, or a channel, what size position should we be using

A

small. the chances of fast reversals and small profits dictate that we should not be in large size at all.

54
Q

if you are taking the short back into a channel formation, what should you expect the wave to go to? what does this mean for taking profits?

A

you should expect it to completely fill the gap. we should still take profits in steps, but we should leave a portion on until the gap fills or it stops out.

55
Q

do flat sma’s provide support and resistance?

A

no, if all of the sma’s are converging, prepare for a breakout event of some kind

56
Q

what is the #1 rule we should look at before taking a gap trigger?

A

the environment and wave pattern.

the trading book (1 decks)

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