Here is a trade setup that has occurred many times recently.
The profit is not always this immediate, but it can still lead to some very nice entries in a bull market.
This setup is very specific, and requires many conditions to be met. Firstly, there is a markup in price. Then it moves sideways.
This encourages longs to enter, as the price is increasing, and there is support at and below the sideways movement.
Then, the price breaks out above the sideways movement. Any shorts will be likely to cover, fearing a breakout to the upside.
This creates buy pressure at this level. More longs will enter, creating more buy pressure.
However, the breakout fails. The breakout trader longs are left in the red, and the shorts get a little bit more aggressive.
The price spikes down, below where the first sideways moved was happening. This causes longs to get liquidated/stopped out,
creating more short term sell pressure. Maybe some shorts enter. The sell pressure lets up soon after the longs are stopped out
creating room for more buys again.
The price begins to get marked up. After all, the longs were liquidated, creating a fire sale. The shorts have covered by now
or are covering if they're smart, because they're in the green and the price is going back up. There is only buy pressure now.
Then, the price spikes up. It had nowhere else to go.
Before attempting to trade this setup, go back and look at many different charts and see it play out. You are responsible for your
own trading. Make sure that you know what you are doing and always manage your risk.
The profit is not always this immediate, but it can still lead to some very nice entries in a bull market.
This setup is very specific, and requires many conditions to be met. Firstly, there is a markup in price. Then it moves sideways.
This encourages longs to enter, as the price is increasing, and there is support at and below the sideways movement.
Then, the price breaks out above the sideways movement. Any shorts will be likely to cover, fearing a breakout to the upside.
This creates buy pressure at this level. More longs will enter, creating more buy pressure.
However, the breakout fails. The breakout trader longs are left in the red, and the shorts get a little bit more aggressive.
The price spikes down, below where the first sideways moved was happening. This causes longs to get liquidated/stopped out,
creating more short term sell pressure. Maybe some shorts enter. The sell pressure lets up soon after the longs are stopped out
creating room for more buys again.
The price begins to get marked up. After all, the longs were liquidated, creating a fire sale. The shorts have covered by now
or are covering if they're smart, because they're in the green and the price is going back up. There is only buy pressure now.
Then, the price spikes up. It had nowhere else to go.
Before attempting to trade this setup, go back and look at many different charts and see it play out. You are responsible for your
own trading. Make sure that you know what you are doing and always manage your risk.