![]() ![]() To limit potential loss when price suddenly goes in the wrong direction, consider placing a stop order to buy back a short position or sell a put option at or above the breakout price. The downward breakout level is the last low that touches the bottom line (4). Step 5: Look for Those Touches Keep an eye out for the price line touching. Litecoin is still hanging around the top of the broadening wedge formation we were looking at last week as buyers try to bust through the resistance. But dont forget to set a stop-loss order just below the lower trendline to manage your risk. Then, make your move when it touches the upper trendline. I am trying to learn how to correctly draw a located wedge pattern. The pattern height is the difference between the highest high and the lowest low. Step 4: Swing Trading Now, for swing traders, heres a tactic: Jump in when the price is on the rise within the wedge. To identify an exit, compute the target price for this formation by subtracting the pattern height from the breakout price. Consider selling the security short or buying a put option at the downward breakout price level. If the price breaks out from the bottom pattern boundary, day traders and swing traders should trade with a DOWN trend. Once these activities stop, the price may break out in either direction. Then value investors begin to sell, believing the price has risen too much, which spurs the original large investor to resume buying again. To create a down (descending) channel, simply draw a parallel line at the same angle as the downtrend. ![]() This should be done at the same time you create the trend line. ![]() When initial buying occurs, other market participants react to rising price and jump on the bandwagon to participate. To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to a position where it touches the most recent peak. This pattern may form when large investors spread their buying over a period of time. The Broadening Wedge Ascending pattern forms when a security price progressively makes higher highs (1, 3, 5) and higher lows (2, 4), following two widening trend lines. ![]()
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