Trading Price 5: When/Where to Sell/Short Flashcards
Price Patterns for when to Sell/Short
- Rally Base Drop (RBD) 2. Drop Base Drop (DBD) 3. Prior Demand becomes Supply
Rally Base Drop (Downtrend)
Creates the Supply Zone to Short
What to think ahead in RBR, DBD, DBR, RBD
When See a Rally or a Drop, expect a base When see base, expect Rally or drop
What are you looking for in Base?
A momentum slow down. smaller range than rally/drop, but size really doesn’t matter. smaller the better though.
what time frame do you look for Supply/Demand zones
Intermediate time frame
how to find RBD supply zone
questions to ask self before short
- what is the higher timeframe trend 2. in intermediate timeframe, you only want to ID origin of strong drop in price, or strong rally in price.
what is main reason why people get stopped out?
They are trading against the dominant trend
Line placement of Rally Base Drop
Proximal Line - low of BODY of base, not Low of wick.
what is pattern
RBD
what is DBD
how to find DBD
What do you want to see in the 2nd drop of DBD pattern?
- want to see the second Drop’s candles CLOSE around 20% of it’s range especially on first candle of 2nd Drop -shows strength in selling pressure
how to draw line in DBD
What pattern is this?
DBD
What 2 patterns are in this?
RBD followed by a DBD
why not short in the middle supply zones?
Because they are not in high 70% zones. low probability
what is Prior demand becomes Supply
Will see in nice downtrends -see the DBD in pattern
level on top of a level
is when there are multiple zones on top of each other. ex: RBD on DBD creating a 2 zones on top of each other move stop to top of highest level or make zone wider. when wider zones, can use #2 entry using smaller timeframe to maximize profits
how to find Prior Demand becomes supply zones
use DBD at end to draw lines
Line placement of Prior Demand becoming supply
what pattern is this?
Prior demand to Supply
Why not want to get in when it first reaches Supply zone after break in zone?
Because it didn’t have a strong sell pressure once it broke through. want to see strong sell pressure to show us evidence of supply zone.
