Watching the slope for a change in sign alerts that a reversal might be coming. A 5 min chart works well for fast-moving stocks, while 7 or 10 minutes will give fewer false alarms. In this case it WAS a false alarm, but there was another reversal with the same signals a few minutes later, so I averaged down at the second reversal candle at 4.33.
Decision points on the way:
- crossover is stronger confirmation of the signal. In this case I sold my average down position just after the crossover, leaving my original buy intact, and having a much lower average entry price.
- Another change in the slope of the . I exited the first trade just after this event, and locked in 12% total profits in 1 hour.
Having a high and increases the odds of the play working.