Trading Price 4: When/Where to Buy/Cover

Question 1

Price Patterns for when to Buy/Cover

Answer 1

1. Drop Base Rally (DBR) 2. Rally Base Rally (RBR) 3. Prior Supply Becomes Demand

Question 2

Drop Base Rally (UPTREND)

Answer 2

Creates the DEMAND ZONE to BUY (UPTREND)

Question 3

Drop Base Rally (UPTREND) DROP

Answer 3

DROP - want drop to be significant because you will get more profit potential on the upside. - it depends on the location of the trend - if in the early part of impulse move, won’t need a big drop - because if in early impulse, will get much bigger move on the way up (incorporate multiple timeframe analysis)

Question 4

Drop Base Rally BASE

Answer 4

• could be 1 to several candles - fewer candles are better - if LOWER on the IMPULSE, won’t matter much because of higher probability to profit. Take trade - If HIGHER on the IMPULSE, then will want to see less candles at the base to take a trade, but shouldn’t take trade high on impulse

Question 5

Drop Base Rally RALLY

Answer 5

• want strong rally. FORCE: want 2 or 3 candles the Rally candles closing AT or NEAR HIGH. (upper 80% of range of candle stick) don’t want a lot of wicks showing - want to see strong rally - expanded range candles, with strong buying power.

Question 6

How to find DBR Demand Zone

Answer 6

1. ID current price 2. Look DOWN and LEFT for the ORIGIN of a STRONG MOVE UP with a BASE and DROP before it. 3. Draw the lines to get a zone.

Question 7

How to draw lines for DBR

Answer 7

Line Placement 1. Proximal Line - The high of BODY of the BASE (ignore wicks) 2. Distal Line: The exact LOW of the BASE (include wicks) 3. Stop Loss: Just a little below Distal Line

Question 8

DBR Why are GREEN candles are strong?

Answer 8

- shows that buyers are aggressive - people want to get into trade.	- shows that people who were shorting are getting out of the market, thus buying

Question 9

Rally Base Rally (RBR) UPTREND

Answer 9

To ID Demand Zone Want to see a strong rally up, pause, and another strong rally up Base can have 1 to few candles. Base floats sideways When LOW on Impulse curve, the 1st Rally does NOT have to be as strong as the 2nd Rally. The 2nd Rally is important one. The BASE does NOT have to be a correction. Can be same color candle. But needs to be a pause in momentum.

Question 10

How to FInd D Zones for RBR

Question 11

How to draw lines for RBR

Question 12

When can put proximal line at top of wick

Answer 12

• if zone is tiny, have great reward potential, STRONG TREND, if LOW on IMPULSE CURVE - need greater chance of getting into trade - if only pennies above body

Question 13

What is the Pattern?

Answer 13

RBR

Question 14

What is Pattern?

Answer 14

DBR

Question 15

What is best demand zones consist of?

Answer 15

When see levels on top of levels very low on the impulse curve

Question 16

Why Not buy in demand zone on top black line?

Answer 16

It is not a quality Demand zone. Quality Demand zones are ones that are in the 1st 30% of the impulse curve. the top black line is in 50% area

Question 17

Prior Supply Becomes Demand

Answer 17

Once price breaks above supply, - in order for it to work well, you want to see HL’s when this breaks out. (Want last HL higher than previous HL)

Question 18

How to find a Prior Supply Zone that becomes a Demand zone

Answer 18

important to find at least two RBD supply zones before breakout.

Question 19

Why do we want at least 2 RBD for a Supply becomes Demand zone?

Answer 19

Want Supply to be eaten up.

Question 20

When have HL’s in trend, what side is being aggressive?

Answer 20

Buyers

Question 21

What is happening to shorter’s mindset when the price breaks through supply zone?

Answer 21

The shorters are stopping out. Those who did not stop out, will be hoping that it will come back down, and when it does, they will buy back their stocks to get out, and that will increase buying pressure. thus turning the supply zone into a demand zone

Question 22

Line Placement for Prior Supply becoming Demand

Question 23

When can you cut through candles to find demand zone?

Answer 23

When looking for Demand zones with DBR or RBR, we are not allowed to cut through candles Only exception is Prior Supply becomes Demand

Question 24

What is pattern?

Answer 24

Supply becomes Demand

Question 25

What is negative about using Supply becomes Demand Pattern?

Answer 25

It is usually at the high point of the impulse curve

Question 26

Why not use DBR on this curve

Answer 26

On a healthy Uptrend, the HL won’t come down. So use Supply to Demand Pattern.

Question 27

What is an odd enhancer for the Supply to Demand Pattern?

Answer 27

Just before the breakout, in the supply zone, you want a RBR. So before supply, want rally, in the supply zone, want base, then out of the supply, want another Rally.