Hello friends,
Market finally picked a direction and it looks like it's gonna continue downtrend. Many novice traders are long biased and they find it very difficult to trade in down-trending market. Today, I am going to share a simple strategy for making quick gains by trading pullback in a downtrend.
Below is a chart of
AMZN
in daily timeframe. You can see that price is in a downtrend.
Below is 5 minutes timeframe chart of
AMZN
.
You can see that above chart fulfills all the rules mentioned below. For this trade, Risk to Reward ratio is 1:3.
Checklist -
1. Price is making LL while RSI is making HL - Bullish Divergence(highlighted in the chart)
2. RSI is below 30 - Price is oversold
3. Price is showing signs of reversal - Long lower wick candle(highlighted in the chart)
4. Above three confluences occurs during the first 1.5 hours of market open before market goes into mid-day chop
5. Risk to Reward ratio is at least 1:2 (shown in the chart)
Entry -
1. Enter at the next candle open after reversal confirmation
Exit -
1. Set Stop-loss below the recent low
2. Set Target at the first resistance
Market finally picked a direction and it looks like it's gonna continue downtrend. Many novice traders are long biased and they find it very difficult to trade in down-trending market. Today, I am going to share a simple strategy for making quick gains by trading pullback in a downtrend.
Below is a chart of
AMZN
in daily timeframe. You can see that price is in a downtrend.
Below is 5 minutes timeframe chart of
AMZN
.
You can see that above chart fulfills all the rules mentioned below. For this trade, Risk to Reward ratio is 1:3.
Checklist -
1. Price is making LL while RSI is making HL - Bullish Divergence(highlighted in the chart)
2. RSI is below 30 - Price is oversold
3. Price is showing signs of reversal - Long lower wick candle(highlighted in the chart)
4. Above three confluences occurs during the first 1.5 hours of market open before market goes into mid-day chop
5. Risk to Reward ratio is at least 1:2 (shown in the chart)
Entry -
1. Enter at the next candle open after reversal confirmation
Exit -
1. Set Stop-loss below the recent low
2. Set Target at the first resistance
