Trade Execution is a 3-Step Process

• Finding the pattern
• Defining buy/sell signals based on support/resistance levels, prior highs/lows, etc..
• Trade/execution

Patterns Do Not Trigger Execution, Price Action Does

Patterns

• Are only "MODELS" in that they are based on past price behavior.
• While: they are "predictive" in that they can tell us if a stock is moving up or down or has the "potential" of a move, they cannot tell us if or when to execute a trade.
• Which explains why a lot of setups never get executed.

Price Action

• a Support and resistance level, breaking of high/lows, etc… triggers the execution.
• So in essence, a PATTERN is only as good as the PRICE ACTION that follows it.

Entry

• They are basically 3 ENTRY Choices on most SETUPS
  • Enter in congestion near a breakout or breakdown.
  • When the breakout or breakdown occurs, wait for a pullback to Enter.
  • Try to enter as a breakout or breakdown starts, and hope to get filled at a good price. (Sort of like trying to catch a cab in NYC on a rainy day.)

Day Trades

• Stocks' BREAKING OUT of short-term patterns such as Bull Flags Bullish Pennants or Ascending Wedges.
• When they BREAKOUT, they will typically tack on 80% of the gains on the day of the breakout.
• In fact, Bull Flags, Pennants...are not real "setups", they are more extensions from previous setups, the basic "more juice" being added to the mix type setup.
• They are short term in nature, and are typically the last stage of a stock's RALLY before a CORRECTION. Bull flags in particular are many times wave "4" of "5", once breakout occurs wave 5 is hit. We all know what happens after wave 5 right?

Swing Trades

• Stocks BREAKING OUT of longer term patterns such as Bases, Triple Tops, Cup & Handles or Wave Patterns.
• When they BREAKOUT, that suggests the move is 20-100% or more away from my entry, and the potential gains are more spread out over time.