Is it recommended to trade on first strong bullish/bearish candle?

[kingsmasher1]

Hi All,
So this is the chart of TataSteel-Apr-27 Future.
If you see the second candle of the day, it went high strong bullish from 488.79 to 493.26, and it does so with good volume !!

But the next one was a reversal.
So, my question is - Is it recommended to dive in to trade with the first strong bullish voluminous candle you see? Or should you wait for the next candle in same direction with same strength. (I know we can always put a stop loss and enter the trade and trail the SL later - but is it recommended to enter?)

There might be several cases here:
1) The next candle might be bearish (as happened in this chart).
2) The same candle might retrace back (kind of shooting star)
3) The next candle might be a doji, if the first candle went high enough - followed by reversal.
3) The next candle might not go that high, may be only 0.5 (not even 1).

Although from daily chart perspective - yes, it was going down, but you never know where the retracement is.

Kindly suggest.
Thanks a lot in advance.
P.S
I trade generally on Sharekhan, and in case of futures i do not re-enter same trade again on different direction (bullish then bearish type of) because they change the BPL (Booked profit and Loss) even if the previous position is closed, and that is real confusing. So i re-enter either using options (if i am optimistic it will go further) or equity-cash-market (if not much sure.)

 

[cloudTrader]

Many things have to be taken into consideration when placing a trade on the candle signal. Even if we try to think in terms of simple analysis then some factors which play a major role are like where did the market open in relation to previous day , has it opened in any kind of resistance or support zone, was the opening influenced by some news, what kind of day we are analyzing it to be , like a trend day or a sideways day , where is the price in relation to previous day close , high or low , is the price in some congestion area etc.,

So in my opinion just taking the candle signal or strength could not be construed as the final signal for placing the trade.

 

[kingsmasher1]

Many things have to be taken into consideration when placing a trade on the candle signal. Even if we try to think in terms of simple analysis then some factors which play a major role are like where did the market open in relation to previous day , has it opened in any kind of resistance or support zone, was the opening influenced by some news, what kind of day we are analyzing it to be , like a trend day or a sideways day , where is the price in relation to previous day close , high or low , is the price in some congestion area etc.,

So in my opinion just taking the candle signal or strength could not be construed as the final signal for placing the trade.

Thanks You for the response. Like you mentioned about the previous day's close/open (or the daily trend), i found a nice related article here: https://tradingsim.com/blog/learn-how-to-day-trade-a-bull-trap/

This guy trades the same script using 2 different charts opened in parallel side-by-side (daily and intraday) using which he decides whether to enter the trade.

Many times people get drawn and enter trades earlier than what they should and miss some bigger opportunities

 

[mastermind007]

P.S
I trade generally on Sharekhan, and in case of futures i do not re-enter same trade again on different direction (bullish then bearish type of) because they change the BPL (Booked profit and Loss) even if the previous position is closed, and that is real confusing. So i re-enter either using options (if i am optimistic it will go further) or equity-cash-market (if not much sure.)

Yes, Sharekhan's automatic Position size aggregation and price averaging is sometimes a nuisance.

Whenever a technology fails you, go to the lower technology. For e.g. Use paper and pencil to keep track of your trades. Or maybe fire up quick and dirty disposable excel sheet. But do not trade substitute symbols just like that.

 

[hames]

In your chart you have just showed one previous candle with reference to the bullish candle. Ideally one needs to look at several previous candles to identify the demand zone/support zone. whether the price is in demand zone and do we see this bullish candle (high chance of price going up) or price is in supply zone and do we see this bullish candle (high chance of price going down).....

It also depends how many times price has visited those same levels and how fast it has moved.

 

[kingsmasher1]

In your chart you have just showed one previous candle with reference to the bullish candle. Ideally one needs to look at several previous candles to identify the demand zone/support zone. whether the price is in demand zone and do we see this bullish candle (high chance of price going up) or price is in supply zone and do we see this bullish candle (high chance of price going down).....

It also depends how many times price has visited those same levels and how fast it has moved.

Agreed, but that was the second candle for the day, hence and Tatasteel was going through a downtrend for the last couple of days, but the second candle was strong bullish with good volume, which perhaps mean there were more buyers entering the market, an increasing price with relatively flat volume or decreasing open-interest could mean a totally different thing (perhaps shorts are covering their position by buying back?) But that is not in this case. There could be chances of retracement from that point upwards (who knows).

Hence my question was, considering these scenario and conditions, would someone have taken an intraday trade at that point?

If you are dealing with intraday futures, a 2-3 Rs strong uptrend could give a nice profit for the day.

 

[rip07]

Divergence... So, no long

Also ST sir mentioned many times, that beginning is driven by novice.. and end is done by professional.

Thanks
rip07