Dear Friends,
Can someone tell me what should be the strategy to trade parabolic moves or veritical moves i.e. once a bar has been created which is atleast 3 times the size of previous bar.
The trend never continues after a parabolic or vertical move but what is the best strategy to trade after such a move has occured?
Replies would be greatly appreciated.
Regards,
Anudeep
Hello Anudeep,
All parabolic moves are not the same and they are to be traded differently depending on where such bar comes in the total trend.
1) Suppose the market has been trending down for many bars, it has printed a few large range down bars.....a prolonged downmove.....and now the move gets verticle and prints a huge bearish bar which opens and closes at the extreme endswith big volume, no tails.....expect this to be an exhaustion or capitulation and the market is ready for reversal to uptrend. Trade accordingly.
2) Suppose the market has just reversed its earlier trend,and it prints a big bar which probably breaks a few pivot highs....that is a trend bar.....always expect this trend to continue for long time and trade in the direction of the breakout/breakdown.
3) Market has just reversed the trend and it goes into small consolidation or sideways movement with low volumes and it breaks out of that range with a wide range bar......it will never be an end of the trend...it will continue in the direction of the breakout...trade from that direction...
Hope the above helps you to trade such large range bars better.
Smart_trade
Note : If you permit me, I would like to copy this question and my reply in my " Ideas on Day/swing trading " thread as many will find it useful in their trading.
ST