Tuesday, April 2, 2013

The Mighty Momo!

This pattern has formed the basis of the vast majority of trades that I've taken over the last 5 years and counting. Whether it be a derivative of the pattern (Pattern Failure or the Appendix) or the pattern itself...

Saying a pattern is "profitable" is, in my mind, completely ludicrous. Simply because it depends on too many factors. The pattern itself is almost irrelevant (but, paradoxically, extremely important in that it has to offer a tiny edge)...it's the framework - both systematic and mental - built around it that's (hopefully!) going to make it profitable for you.

Some of the answers to the many questions which have to be tackled when using this approach have their foundation built upon market dynamics. Some are based on the trader him/herself. Others are a combination of both:-

* What Time frame? The considerations are very different when used intra-day as opposed to swing trading...
* What high do you choose as your anchor? Why?
* How do you trade out of the third high? Reversal candlestick trigger? Channel break? Or do you just trade the level without "confirmation"
* How will the above alter your R:R? Will it alter your WR?? (See below)
* Are you using a fixed stop or a technical stop?
* How accurately can you pick off the highs? *Are you playing the statistical game or analytical one? That is, take profits that work based on R:R and WR or try to get to S/R / target levels based on...whatever?

There are probably more, but it's late and I want cereal!


Unknown said...

what kind of cereal?

James Edwards-Marche said...

Ummm...the kind you eat with Milk? lol (though I prefer watered-down cream..yum!)