Retracements to a trendline or moving average identify profit opportunities. It works because each price dip brings in new buyers who missed the last opportunity. Short sale swings should be avoided completely when momentum is high unless you're a highly experienced trader. Trying to pick tops is a loser's game. Most traders can delay short sales until momentum drops sharply but price is high within its range.
Pattern analysis can then locate favorable countertrend entry points with limited risk.
Traders can take long positions any time momentum is high as long as tight stops and rigid discipline limit losses. One ideal chart pattern will exhibit accelerating price movement with expanding price bars and volume. Combine this with rising MACD spikes and you've found a profitable entry strategy. Or look for this dynamic state through the spreading width between short and long averages on Moving Average Rainbows . All rights reserved.