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Triangle Trading Pattern For High Probability Trend Trades

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Triangle Trading Pattern Strategy
Triangle Trading Pattern Strategy

The Triangle Trading Pattern that many traders look for are large patterns with lower highs and higher lows. Today, however, you’re going to learn a smaller triangle trading pattern that occurs within a trend.

Trading this type of triangle is a great way to find an excellent spot to enter a trend. This provides you with an opportunity to enter a trend trading setup with very little risk because of the narrow range of the triangle pattern on the chart (whether you’re trading stocks, futures, Forex or E-minis).

Let me know if this video on triangle trading patterns was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

When people usually look at a Triangle Trading Pattern, they’re looking at lower highs and then higher lows for a medium sized or pretty big pattern. This will be a symmetrical triangle pattern.

There are two other types of triangles:

  • A descending triangle chart pattern which has a lower high and an equal low.
  • An ascending triangle chart pattern which has a higher low and an equal high.

These large triangle trading patterns are okay, but I don’t personally trade them very much. I’ll show you the triangle trading strategy that works out very well for me.

THE TRIANGLE TRADING PATTERN THAT WORKS BEST FOR ME

What I like to look for are triangles in these little retracement spots. Little retracement there, that’s where I want to see a triangle. This functions as a nice triangle breakout indicator. I call these “Trending Triangles.”

BTW, this works as a Forex triangle pattern indicator, but also for the stock market, futures and E-minis as well.

The first thing is the overall trend is down. We are in a fairly good down move and that’s the first thing that we’re looking for and we’re going to trade in the direction of that trend. This moving average is the 50 period simple moving average by the way.

OTHER TYPES OF TECHNICAL ANALYSIS TREND RETRACE PATTERNS

There’s a little move up, a higher low, higher high, complex retrace, a, b, c complex retrace right there. Sometimes I’ll take that short. Depends on other things. But what I prefer even better than those are these triangle retraces. A little triangle trading pattern within the retrace. So here you go, there is your lower high, and here’s your higher low, and there’s your triangle.

We’re going to take it short but the dynamic of what’s happening here and the energy of the market is that again the overall dominant direction of the market is down and we had a pretty darn strong move here. What happens when you get strong moves like this often is that people are hesitant to take the market short, because they feel they’re late to the party now.

This is mass psychology as to what causes these patterns on the charts is that people hesitate and they say, you know what, we already missed out on this big move or people were in on the move and they are taking their profits, and so they are actually getting out.

Maybe they put in a stop above the high of this bar or something. And so on the market retraces back up a bit. And you have a lot of volatility coming down. That’s also important. The market goes through a cycle of being highly volatile and then going into low volatility.

CYCLES OF VOLATILITY AND TRIANGLE TRADES

Those of you who are familiar with Bollinger bands, you understand this concept. Bollinger bands will expand and then contract. You go on a little Bollinger bands squeeze. And that is a constant fluctuation in volatility of market. That’s a cycle. Another type of cycle in the market.

Here we had a higher high volatile time in the market and then volatility comes out well. If you can catch it at the end of that low volatility cycle, then you will usually get a pretty good impulse move out of that pattern, in this case it’s a triangle trading pattern. And that’s why I like trading triangles is because the market will often explode out of them and make some, you know pretty decent money in a short period of time. So a risk on this trade is from there to there.

THE TRIANGLE TRADING STRATEGY PROVIDES AN EXCELLENT RISK-TO-REWARD RATIO

The potential reward that the move gave us was all the way from there to there. So that’s better than 2 to 1, better than 3 to 1. And that’s how you have to look at it. Not so much the pennies over here.

A triangle trading pattern is a contraction pattern. It shows you when the market is going to low volatility and we like to get in at the end of them back in the direction of trend for another explosive move or at least explosive for a great risk-to-reward ratio.

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Also I am giving away one of my favorite chart patterns that works today. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

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Trend Trading with Moving Averages for a Living

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Trend Trading with Moving Averages
Trend Trading with Moving Averages

Trend trading with moving averages can keep you out of choppy conditions in the Forex, futures and stock markets.

There are many trend trading indicators and many trend trading strategies, but I find that using a 50 day moving average strategy is the best way to keep a trader out of non-trending market conditions.

Let me know if this video on trend trading with moving averages was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

Welcome to this video on trend trading with moving averages. Today we are going to look at a very simple concept, but a very important concept. And that is the cycle of trends. That’s right. Trends actually go through cycles. That essentially means that sometimes the market is trending, and then it goes into a period of non-trending, non-directional. Now first of all let’s define trend.

A SIMPLE TREND FOLLOWING STRATEGY

Webster’s dictionary defines trend as this, “The extended general direction.”

This definition tells us that the word trend means a long-term move, as implied by the terms “extended” and “general” in the definition. Whenever you’re talking about trend, you are referring to a long term move, not a short term move. I like to use the 50 period simple moving average and that’s this line right here. I have it color coded so when it goes up, the trend is green, when it goes down, it turn red.

Now if it’s just flat, I consider that we have no trend. It’s a trendless market. We are in a cycle of non-trending. A non-directional cycle at that time.

TREND TRADING WITH MOVING AVERAGES

Another thing that I do however is I also look at price action in relation to trend trading with moving averages. We have it above the 50 MA, and it goes below the 50 MA. Then it goes back above the 50 MA, then back below the 50 MA. Then back above the 50 MA, then back below the 50 MA. We consider that a trendless market. We are now in a cycle of non-trending. It’s basically directionless. In the sense that it’s not committed to either bullish direction or bearish direction for an extended period of time.

I use 50 period moving average, but also this black line that is the 15 EMA. Many traders use a 20 period moving average strategy, but prefer the 15 exponential moving average.

Now how do I use that? It doesn’t define trend for me but it defines the relative strength of the move. I’m not trend trading with moving averages of either the 15 EMA or the 20 SMA. Nor am I interested in a moving average crossover.

THE BEST MOVING AVERAGE STRATEGY

I don’t want price to come back down below the 50 MA, in order for us to sustain a trend, I actually want it to stay above the 15 EMA to indicate that it’s a fairly strong trend. As long as it’s above the 15 EMA in an uptrend, therefore the relative strength is to the upside, and we got a good trend. As you can see here, we have 5 waves and then a failed 7. Five waves today is about an average that you are going to get on a trend. And basically I am talking about higher highs and higher lows. These are not Elliott waves.

Now let’s take this a little further. We went from a non-trending market over here. We use the moving averages as basically, well creating structure. You could see that just looking at price bars if you wanted to. But I think using the moving averages helps you to see even it more clearly because there is a clear structure there with price in relation to the moving averages.

TREND TRADING FOR A LIVING

Alright so we went from non-trending to trending. Now let’s see what happens. So as the day goes on, well what happens? Okay we kind of start getting all messy again. Don’t we? So we put in our, the top of our trend here, and now things get a little messier. So what you will see here is that we go down, we do get below the 50 MA, 50 MA does turn down.

But look what happens to our 15 EMA. Price comes above it and we get an open and close above the 15 EMA. Now it does go down below it, then it comes back up above it. Again this basically what’s happening here, the market logic, as I like to call it is that when it breaks above the 15 EMA. That means that’s short. We’ve had some major selling here.

TRADE IN THE DIRECTION OF THE DOMINANT ENERGY OF THE MARKET

Now in order for this market to resume a trend right away, we want that dominant energy of selling to remain in the market. So we don’t mind some oscillations. We don’t mind a retrace but we just want to retrace to the 15 EMA. Why? Because that indicates that there may be some profit taking down there. And maybe some retail buying, but no professional buyer. We don’t want a lot of strength coming back up. Because that would indicate that well, there is a lot of volume coming in, lot of buyer volume, may be some professional buyer volume. And that then dissipates the downward energy of the market, the dominant energy of the selling.

So when it gets up above there that indicates, ‘oh okay, hmm well we are getting quite a bit of buying.’ Comes down, makes a higher low, higher high, another higher low, higher high. So even though eventually it goes down and makes a lower low. Boy these are tough times to sell. And you wouldn’t want to because we are looking for an imbalance. We are looking for the market participants to maintain a very very bearish sentiment. And when the market comes back above the 15 EMA, that’s one indication that they have not retained a bearish sentiment at that time. And at that time is critical because you have to determine what time are you going to trade.

THE RUBBER BAND TRADE

Now this actually is a rubber band trade here. And this is the trade I give away for free. It’s a great little trade there and so anyway if you like that, feel free to request that. We give that away for free in a free video. And then it, we come down, and we make a little double bottom here. How much time do we have? Oh we got time for a little bit more. Alright I’ll give you a little bit more.

So again just to engrain the pattern into your brains, again we go back in to a cycle of non-trending. So get used to this, don’t think that just because the market stopped a down trade, that is then going to turn into a uptrend. In fact that’s rather rare. Normally the market, after it’s done with an uptrend goes into a non-trending market, after it’s done with the downtrend. It goes into a non-trending market cycle.

TREND TRADING FOR DUMMIES

Trend trading is best when kept simple. There are many fancy trend indicators, but I’ve found trend trading with moving averages as well as anything. BTW, I’m the author of Trend Trading For Dummies (Wiley Publishing). It’s a great resource if you want to dive deeper into the subject.

I try to keep these videos short, so that we just stay to the point and give you a few examples, though I like to give you more examples so that you can see some of the variations and help get the pattern ingrained into your brain cells. So when you see them in your real trading, you’ll have seen several variations.

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Trading Multiple Time Frames Forex to Dramatically Increase Profits

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Trading Multiple Time Frames forex
Trading Multiple Time Frames forex

Here’s how trading multiple time frames Forex, stocks and futures can dramatically  improve your win/loss ratio.

Trading multiple time frames Forex or any other market is a common practice for those using technical analysis to trade the stock market, Forex, Eminis and other futures markets. It can be used to increase both your win/loss ratio and also your risk/reward ratio.

Let me know if this video on Trading Multiple Time Frames Forex was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

Welcome to the video on trading multiple timeframes, a very, very important topic.

One of the reasons that using multiple timeframes Forex is very important is because when you have two time frames that align, that give you a good buy signal or good sell signal concurrently, you have a higher probability of a winning trade.

Why is that? There is a market logic to it. The market logic is that you have some people looking at one timeframe, for example here we have the daily chart. This is the spiders. But the point is this is a daily chart. So you’ll have some people, for example, looking at a daily chart. And trading of off that. That’s one group of market participants that are looking for sign and why trading multiple time frames is so powerful.

TRADING MULTIPLE TIME FRAMES IS THE KEY TO PROFITABILITY

A sign that it will be pretty obvious one that a lot of people trade is the market coming up, breaking through this resistance level here, coming back down, and resistance then becoming support, and the market going up. That’s a very traditional technical analysis thing for people to be watching, and especially when it’s a significant support or resistance level. That one is because if you go over here, you’ll see that that level is of off these highs. These major highs here basic triple top. 1, 2, 3, I’ll mark that for you. So there is 1, 2 and 3, so triple top trading pattern.

A lot of people have looked at this, and the more people who see something, the more people respond to it in the future. that means you have more people buying, more people selling. therefore it’s more likely to be a self-fulfilling prophecy. And that’s really how markets work is it’s a big auction place. And the more people that are buying, selling, that’s basic supply demand and so that high then, is going to be one that a lot of people see. Again, that’s the logic of why trading multiple time frames Forex or any other market works so well.

HERE’S LOGIC BEHIND WHY MULTIPLE TIME FRAME TECHNIQUES WORK.

We are going to have some people who will take profits into that. Which is probably why you have that one red bar there. And the market goes above it, and then it comes back, and says well wait a minute, let’s see. Are we really serious about that? We got above it and going to have people be a little skittish, and then when it moves back up, even here you see these bars here for example, these bars are a bit of a hesitation, aren’t they?

You got a doji bar, you got a narrow range bar, another narrow range bar. Until we break the high above this bar, and then you get your big candlestick. And that’s when the market has real extra confidence. So this is your first significant move, and then there and then there in the step 3.

THE PROBLEM WITH THE MULTIPLE TIME FRAME STRATEGY

The problem is, so that yes that is a great pattern. We love it. however, the challenge here is, if we take this trade based on the daily chart, we are getting in, not half way past the move from this low to that high. In fact even less, and then that high and now we are all the way back down to here. So it’s a late entry. As far as I am concerned.

So the problem is the reward on it is not that great. And we want not only a high win loss ratio. That’s got a pretty good high win loss ratio on that tip of the trade. But it’s not a great risk reward ratio. It’s not too bad, but it’s not stellar. We want a better reward to risk ratio. So how do we get a better reward to risk ratio?

Well the same answer. Trading multiple time frames Forex, stocks, futures or E-minis. So let’s bring up a longer timeframe, in this case a daily chart.  In this case a weekly chart. So now I have the weekly chart on the right, and the daily chart on the left. So we’ll call the daily, the shorter time frame, the weekly, the longer timeframe.

EXAMINE THE DETAILS OF A MULTIPLE TIME FRAME TRADING SYSTEM

We have a nice setup over here on the weekly as well. Right in this area here. So trend is up, that’s the 50 period simple moving average. Got a wave 1 and a 2. So that’s a first retrace in the trend. And then we get a very nice 3 bar candlestick pattern for a bullish signal. By the way, this black line is the 15 EMA. Now as that comes in, you see early November, so it comes in around this time, right in here. Early November.

What happens on the daily chart, well we get a gap up. Boom. Nice big gap up. Okay, let me bring my crosshairs on here. So with my global crosshairs, you can see where these match up. There we go. So let’s just do it this way here. Okay, so now you can see, we got in a lot earlier, or we could have potentially got in a lot earlier, if we would have looked for this setup on the weekly chart instead of the daily.

HOW TO IDENTIFY A TRADING TRIGGER ON STOCKS, FOREX OR FUTURES

Now we want a good signal, a good trigger, if you will on the daily chart as well, but we are primarily looking for the setup on the longer term chart. By the way I am using daily and weekly charts but this can apply to any 2 timeframes. You could use an hourly chart, a 4 hour chart or shorter time frames if you want to as well.

The point is, looking for the setup on the longer term chart now, what that does, okay look where we are here with our crosshairs. I don’t know If I can keep that there or not with my drawing tools here. That’s going to work, but here was our, our entry before. Remember breaking above resistance and retracing back to support, and so we got in here, about I’ll say somewhere around 220 or so.

Now we are able to get down, we are able to get in here somewhere around, let’s say 214. 13, 14, 15, somewhere in there. Depending where you would actually take your entry, and oh my goodness, look at that, you have doubled your profits, roughly.

You know that’s where it’s gone, so far. So our initial reward, if you would have taken the setup on the daily chart as that, your reward on it if you take it on weekly chart is that plus that huge difference. Huge difference. So in this case about double. And so therefore I like to always look for setups on the longer term charts, and then look for triggers on the shorter term charts. So that I get a superior risk reward ratio.

TRADING MULTIPLE TIME FRAMES FOREX INCREASES YOUR WIN/LOSS RATIO

I also find, as we said at the beginning of the video, trading multiple time framest also increases my win loss ratio. Now the one thing that I will say is the downside of this approach, is that you don’t get as many trades. And that’s just a logical thing. If waiting for trades on the longer term chart, well there’s just not just going to be as many trades because there’s not as many bars in the same period of time.

One of the ways to resolve that is simply be trading more markets, have a variety of markets that you trade, I would trade a lot of, I do trade a lot of  non-correlated markets so that I get a lot of opportunities on the longer term chart.

So very very important principle and one of the thing that I would say too is timing is absolutely critical. So might ask, well how would you know to get in here, of course that’s a 5 wave pattern, that’s your average trend. So trend reversal there was to be expected.

TIMING IS EVERYTHING

A Timing indicator would indicate that. If you have interest in my timing indicator, I do give away that for free on the webinar, where I train you how to use it and give it to you all for free. Just send me an email at Barry@TopDogTrading.com and I’ll be happy to send you over that info. But timing is absolutely critical. And then again, trading with the trend over here on the long term chart, and trend reversal after 5 wave pattern here is actually in alignment of trade and trace. They are just different signals. But they are still both long signals.

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Also I am giving away one of my favorite chart patterns that works today. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

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S&P 500 Trading: How to Get Superior Returns To the Stock Market

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S&P 500 Trading
S&P 500 Trading

S&P 500 Trading is considered the benchmark for market performance. If a fund manager can produce better returns than the S&P index, they’re considered a super star. Yet the vast majority of even professional traders fail to achieve that aim.

For this reason, many investors simply want to learn how to invest in S&P index fund and that’s fine. But what if you want to try for more?

Some learn how to trade S&P 500 options, thinking the extra leverage may help them.

In this video I’ll show you a tool that will help you in your personal quest to outperform S&P 500 Trading benchmarks.

Let me know if this video on S&P 500 Trading was helpful to you. Please leave a message in the COMMENTS section at the bottom of this page. 

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons above, or at the very bottom of this article.


VIDEO TRANSCRIPT

Welcome to this video on S&P 500 Trading.  This one is very interesting. One of the most, really powerful things that I have come across and so let’s dig right in.

This is especially good for swing traders and ways to potentially outperform the S and P 500 which is the benchmark that most firms use and so forth. And of course as you probably know, very few people, very few funds outperform the S and P 500 index, so if you can do that, you are already in the top echelon of traders.

So here is one way to attempt to do that. No guarantees of course. But here is a way that, one technique that I use that works very very well for me. So take it, try it and here it is.

YOU CAN’T USE A NORMAL CHART IF YOU WANT TO OUT PERFORM THE STOCK MARKET

What we have here is a little bit of an unusual chart for most people I would say. And if you look over here, we don’t have any prices. We have percentages. And that’s because we are using a chart that is a percent change chart. So what it does is it starts, I have a start 90 days ago, so when I start on the left hand side of the chart. That’s 90 days ago, 3 months. And then of course it starts at 0.

I don’t know if you can see that. Really thin yellow line, but that starts at 0, so it, of course on day 1, it has 0 change. So then, as we begin, going after, the very first day that we begin, then it’s going to go above or below, and that tells us the percentage change that that market has had.

Okay, then we are going to compare, so anyway, you can tell as of this last day on the chart here, the S and Ps at 5.84 %, okay and that’s the black line. The black line on here is always going to be the S & P 500. Now, then I use another line, and I plot another market. In this case, it is the wrestle, the wrestle 2000.

USING PERCENT CHANGE IS THE KEY TO S&P 500 TRADING

We are comparing the percentage change between two markets. So here is the shift, and this is what we are looking for is the shift where now, again remember this magenta line, this purple line is the wrestle 2000, and it shoots above the S & P 500, and now it is, almost made twice as much money on a percentage basis than the S & P 500. 5%, 10%.

So that’s great, okay now that’s the easy way to read it, that’s the beginner’s way to read it, and not necessarily the best way. So you could look for simple cross of the two markets here. Alright, that’s one way.

A GREAT INDICATOR FOR THE SPX TRADING VIEW

Another way is to use an indicator like this, which is just a simple mathematical formula. It’s called the spread, or sometimes it’s called the difference, and all it does is it measures the difference between these 2 lines. So you make one as the major one and then the other as the secondary one. So what we are doing is, we are really in this case we are going to have all our charts the S&P 500 index.

That’s going to be our standard and we are looking for market that may outperform it. So we are going to have this line, have the dominant market be our comparison market. So if you look at this, what you see is that this line is going down down down down down down. And that means of course that are secondary market, the wrestle on this case is underperforming the S & P.

LOOKING FOR A “SHIFT” IN THE RELATIONSHIP BETWEEN THE S&P INDEX FUND AND ANOTHER MARKET

Then we are looking for a shift. So this will give us a little earlier reading potentially, where if we could draw for example, a trend line here, unless it breaks that trend line, get in there, and then potentially get in a little bit earlier here, instead of here. And that gives us more profits. We are getting in earlier.

Another thing that you can do is you can draw horizontal lines like this, gets you in about the same time at this point. Okay, so that’s all great. Gets in Just a little earlier. Now let’s compare with some other markets.

AN EXAMPLE OF HOW TO POTENTIALLY OUT PERFORM S&P 500 TRADING

So we could go through the major indices and go to the NASDAQ composite. Now here, again the black line is the S & P, the magenta line is the market we are comparing it to. In this case, the NASDAK composite. It’s underperforming. It’s only made 3.9% as opposed to 5.4%. And now you notice the difference line is just kind of going sideways. And it had gone up, now this looks weird.

The way we have to look at this is, that the spread, actually like calling this indicator the spread indicator. The spread between the 2 lines is that distance there which is, well bigger than that distance here. So if you would have bought here, you would have made more money than if you would have bought the S&P 500 at this time. Notice that if you bought the composite.

Even though the magenta line is still under the black, and that’s why, you know if you bought this, breaking this high here, or trend line here, you would have made money because that’s closing the spread, and therefore during this period of time, it’s catching up. Now this period of time, it’s losing ground again and that’s why this thing goes down. And the spread between the 2 lines is much bigger.

THE VARIABLES

So a lot, of it depends on when you get in, you get out, things are in flux, just like everything in the market. They are dynamic flux of up and down. And so it’s not always a long term strategy. It’s a Swing trading strategy. Which is holding overnight but for short periods of time.

Alright, let’s look at couple of other markets just out of interest. So now if we go down here, you can do this for example with, just deciding to what do I want to trade? alright, so for example right now, we have got great opportunities with currencies, but if you don’t want to trade Spot forex, you can always trade, and you can do this with Spot forex, you can do it with futures, you can do it, in this case with ETFs. So say well, maybe I want to invest in currencies.

IT’S ALL ABOUT TIMING IN THE STOCK MARKET

Well, probably not so much right now at least. Because here, again it’s all about timing, right. So here, here, here, here, here, it’s underperforming. That’s the magenta line, that’s the euro. That’s euro. And then it caught up, and then we broke that line, yes you would have made more money buying the euro, than buying the S & P 500. And then we get another shift again. Crossing of the lines here, breaking of the trend line here, and then you would be like, ‘ah no, don’t want to be in the Euro anymore, now I want to be back in and be doing S&P 500 trading.’

So how do we get some indication as to when that might occur. Well during this time, these markets are moving pretty much similar way. The S & P 500 and the emerging markets, and not seen by the spread indicator. Just kind of going sideways here. So what the opportunity is, we look for it again, the cross of the lines, but more specifically I like to look for this breakdown here, this support.

THE ALL IMPORTANT “SHIFT”

That’s the key. That’s where, okay, now we are getting a shift where in this case, the S & P 500 index is outperforming, and it’s going up a bit, but the emerging markets are going down dramatically.Then again, another breakdown occurring there. And that’s where you could go short.

To outperform the S&P 500 index, you don’t always have to be buying something that is doing better on a percentage basis. Being more bullish in other words. So you can get a little tricky and say, hey I am going to short markets that are going down more than the S & P is going up. And that’s another way to potentially, financially outperform doing the S&P 500 trading.

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