Higher Highs and Higher Lows

The trend is your friend. How many times have you heard that famous saying? Probably too many, right? Well there are several sayings and reminders when it comes to trading that stand the test of time, and this is absolutely one of them. I start my Group Coaching class each and every session by reminding traders to consider the trend. To me it is so important, and it is a good reminder to look for opportunities when it comes to trends.

As traders, we are always looking for an edge and to put the odds on our side. Looking for opportunities and being patient fit these criteria. To me an uptrend is an underlying that is setting higher highs and higher lows. I consider these highs and lows to be pivot levels. I tell the class to be patient and look for bullish opportunities within the uptrend. I like to see pullbacks (buy setups) or pullbacks to support areas and look for reversals. In a higher high that correlates with resistance, I automatically look for a two-bar bullish closes above that resistance level to confirm a break of resistance. Of course, there is no guarantee any of these setups will work, but to me I am putting the odds on my side.

On the flip side, an underlying that is setting lower lows and lower highs would be classified as a downtrend. Look for bearish opportunities within the downtrend. I like to watch for rallies (sell setups) or rallies into resistance areas and look for reversals. In a lower low that correlates with support, I look for two-bar bearish closes below that support level to put the odds on my side that the underlying will continue to move lower or at least not higher. Once again it is not a guarantee, but to me the odds are on my side.

The bottom line is to trade with the trend, be patient and put the odds on your side as much as you can. It can only improve your odds of being successful and profitable!

John Kmiecik, Market Taker Mentoring

Trader Education