Dear reader, this is a full-fledged trading system. If you follow all the mentioned steps correctly, you will definitely have a great winning ratio. You can back-test this system on any instrument, stock, commodity, forex, etc.
This system should only be used to take “Long” trades using the 5 min time frame on a stock that has sufficient liquidity.
Steps to follow:
1. Look for divergence – The first and foremost thing that you need to do is to look for the . The must be either strong, medium, or hidden . Ignore the weak . If you don’t know about , you should read my thread on it.
Here’s the link:
2. Look for early signs of reversal, after the divergence has occurred – As soon as you spot divergence, look for different signs of reversal. These can include either some reversal, neutral patterns or a sharp curve in along with the formation of some .
3. Look for patterns – You should look for the such as a , , , a railway track pattern, pattern.
4. When to enter the trade? –You should wait for the price to close above the and there must be some sort of increase in which confirms the buying interest. When the price closes above the with a good , enter the trade. Until both of these conditions are met, do not enter the trade.
5. How to set stop loss? – The stop loss can be either the swing low or the low of the reversal candle. Also, you can either use a fixed stop loss or trail your stop loss to the succeeding swing lows.
6. How to choose the target? – The minimum target should be the previous swing high or the previous . You can keep trailing your position if the stock keeps giving multiple breakouts.
This system is highly effective and you can modify it according to your needs. You can read and revise this post until you master the concepts. I hope you find this post useful. Also, if anyone is interested in getting a PDF version of this thread, then you can message me, I'll provide it.
Disclaimer: This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
-NSE (NCFM) Certified Technical Analyst