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Hi, I was watching video 33B when I came across this particular case which raised a lot of questions in my mind. Would be grateful if someone could entertain a discussion regarding the same. Thanks.
1. Al says that one should exit below 1. To me it seems very premature and I am not comfortable with it. That way, I would hardly be able to stay in a trade. To me, I could exit the trade below 2 after the micro DT. Wanted to know if there was something wrong with my thinking here? Why does Al ask to exit after bar 1? Is it because, the price is around the general area of a MM up from the BO that created the long position in the first place?
2. Since, the market is pulling back after a wedge, it is a decent swing sell setup I guess? So, would it be wrong to short below 3 for a TBTL that is reached around the highlighted purple box, exit probably above that bull bar?
3. Since, the same pattern might be visible on a higher TF chart, would it be okay to short below 4(despite being a bull bar) for bigger low 2 short(first smaller low 2 being below 3)?
4. Since there is a lot of TR price action, is it okay to buy 5 or above the high of the bull bar following 5? That is where the 20th bar of the PB is from the wedge high. It is also a high 2 buy to my understanding. Is the probability for this trade just above 50% or is it on the higher side, say 60%?
5. After the DT(?), is it a HH MTR? It is fulfilling all the criteria of HH MTR, there was a major TL break, there was sufficient selling pressure and there are enough bars. So, it should be an okay sell after 3 or 4 consecutive bear bars right, despite having 4 very big bull bars closing on their highs? At what point does the low probability transition to high probability in this sell? Where does the always in direction flip? Is it only after the break of major HL as I marked on the chart?
Thanks! Sorry for the long post.
Hi Abir,
I will comment on the first question you asked.
The main thing you have to understand while watching the Trading Course is that there are many different styles of trading and this includes trade management.
When it comes to swing trading, Al tends to trade swings in a piecemeal fashion. This means that if he believes a pullback is likely, he will exit and then look to re-enter again in the direction of the trend after the pullback ends. I have rarely seen him manage his trades using a trailing stop.
He recommends bulls exit below 1 because we have 3 pushes up in the rally and this creates a wedge. Most trends end after 3 or 4 pushes. And once bulls see 3 clear pushes up they will take profits and create a pullback.
This is one way to manage the trade. Once you think a pullback is likely you exit and then look to re-enter in the direction of the trade after the pullback ends.
The other way, is to keep relying on your swing stop, which is below the first pullback and just hold through pullbacks and trail it as the rally keeps going up.
In your post, you are also asking why not exit below 2? You can also do that. Some traders will want to see 2 consecutive bear bars closing near their lows after the wedge top and then they will short below the low of the 2nd consecutive bear bar closing on its low, which is bar 2. Now in this particular case, Bar 2 is very close to the low of the buy climax, which is the first target after a reversal, so there is not enough room for a scalp.
Again, there are different styles to swing trade management and none of them is the best or the worst. When it comes to me, I try to pick one and stick to it, so I don't have to think too much how I will manage every single trade.
Q: 2. Since, the market is pulling back after a wedge, it is a decent swing sell setup I guess? So, would it be wrong to short below 3 for a TBTL that is reached around the highlighted purple box, exit probably above that bull bar?
A: Wedge Tops/Bottoms are good for scalps. Most of them do not result in swings but trading ranges. So if you are shoring a Wedge Top go for a scalp, meaning 1x risk:reward. It is still a minor reversal.
Shorting below 3 will be wrong. Bar 3 is a fourth sideways bar, so you have a tight trading range. You don't short at the bottom of a tight trading range. Plus the first target after a Wedge Top is the bottom of the last buy climax, which here is the big bull bar prior to Bar 1. And Bar 3 is only a few ticks above the low of the big bull bar, which is a buy climax.
He recommends bulls exit below 1 because we have 3 pushes up in the rally and this creates a wedge. Most trends end after 3 or 4 pushes. And once bulls see 3 clear pushes up they will take profits and create a pullback.
Yes, that would make sense.
Shorting below 3 will be wrong. Bar 3 is a fourth sideways bar, so you have a tight trading range. You don't short at the bottom of a tight trading range. Plus the first target after a Wedge Top is the bottom of the last buy climax, which here is the big bull bar prior to Bar 1. And Bar 3 is only a few ticks above the low of the big bull bar, which is a buy climax.
Thanks. This part was especially helpful. So, I guess most of the time, only parabolic wedges would have enough space between 2 consecutive reversal bar closing on their lows/highs and the bottom/top of the climax(which is the first target). Or are there different considerations in case of parabolic wedges?
Wedge Tops/Bottoms are good for scalps. Most of them do not result in swings but trading ranges. So if you are shoring a Wedge Top go for a scalp, meaning 1x risk:reward. It is still a minor reversal.
Is that even true when the pullback from a trend is also in the form of wedges? I mean, instead of high 2 buys, we get high 3 buys in the direction of original trend and vice-versa. Maybe, I observed very low probability events but I have seen terrific swing moves after a wedge pullback in the original direction.
More importantly, thanks for taking the time to clear my doubts. It was very helpful.
5. After the DT(?), is it a HH MTR? It is fulfilling all the criteria of HH MTR, there was a major TL break, there was sufficient selling pressure and there are enough bars. So, it should be an okay sell after 3 or 4 consecutive bear bars right, despite having 4 very big bull bars closing on their highs?
Al discussed these points in video 33D, so if anyone's following this thread, you can find the answer here.
