Why multi-month patterns are more successful (SPOT)
It is easy to get caught up in the idea of getting a bunch of small winners is the best way to grow an account. This is because of the rush you get when a win occurs. The more often it happens the better you feel. In reality, this works against the trader's odds because you have to win more often and have to be more accurate. What I want to focus on are the long term patterns. over the course of several months. These trades tend to net more profit and cause less stress for the investor because they take less maintenance and effort to trade. The win ratio can be smaller on these trades because the profit is larger.
This chart of Spotify (SPOT) is a perfect example of a macro (long-term) multi-month chart patterns that paid out huge profits. This ticker has had a history of macro breakouts most recently a few days ago. The price really follows the moving averages well and consolidated under a clear price of 292. There are a few things you want to look for when trading macro patterns.
1. clear support and resistance lines. in this case, 292 is resistance, and 245 is support. These levels are easily marked and tracked. One could even buy at support for these trades and sell closer to resistance.
2. Volume is king. A low volume name is never going to leave its range. SPOT has tons of volume being a tech name that has huge popularity. I usually look for names that have one million in shares volume per day.
3. For a breakout to be confirmed it needs to attempt the resistance price AT LEAST 3 times. The third time is important because it's a psychological tipping point for most traders and algos.
I like to refer to these as layers of probability. The more you have the more likely a trade is to work in your favor.
This chart of Spotify (SPOT) is a perfect example of a macro (long-term) multi-month chart patterns that paid out huge profits. This ticker has had a history of macro breakouts most recently a few days ago. The price really follows the moving averages well and consolidated under a clear price of 292. There are a few things you want to look for when trading macro patterns.
1. clear support and resistance lines. in this case, 292 is resistance, and 245 is support. These levels are easily marked and tracked. One could even buy at support for these trades and sell closer to resistance.
2. Volume is king. A low volume name is never going to leave its range. SPOT has tons of volume being a tech name that has huge popularity. I usually look for names that have one million in shares volume per day.
3. For a breakout to be confirmed it needs to attempt the resistance price AT LEAST 3 times. The third time is important because it's a psychological tipping point for most traders and algos.
I like to refer to these as layers of probability. The more you have the more likely a trade is to work in your favor.
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