Recently it dawned on me that when I am looking at charts I am simply looking at what I see and then working out if I either see the perfect trade or if there is the potential for the perfect trade should xyz occur. It is a skill and view I have taken for granted and it has motivated me to share it with you in the hope you may start to use it to improve your trading.
When you look at a chart what do you see? Here are some possible options:
- A trade
- A trend
- You missed a move
- Buy/sell now
- I knew it!
I am going to add a final option to the list which does look a little out of place 8 is “the perfect trade for me would look like”. This post is going to be about seeing the trade before it has even set up. Being able to do this is a skill that requires a proven strategy, a set of rules and the understanding as to what the perfect trade on any particular chart would look like.
Take for example Wells Fargo which is a US stock. Have a look and think about what you see when you look at this chart.
Now here is what I see and what I am looking for as the best trading possibility based on my rules.
I want to see price pull back to $50.00 which is also in what I consider to be the buy zone in an uptrend in relation to the moving averages I use. I also see $50.00 as being in the buy zone with relation to the Fibonacci levels and the 50% level is almost perfectly lined up with $50.00. Another thing I see at $50.00 is that it is an old resistance level which when tested can possibly become support. Now all of the above mean nothing without having a small bullish candle rejecting $50.00. Now obviously I have no idea if this will come together and provide me with my “best trade” scenario but I do now have a plan for this stock and a plan is very important. I have visualized exactly what the very best looking trade would be and now I simply need to add it to my watch list and see if it unfolds. Do you do this with your trades or do you just act in the moment?
As a wise man once said “plan your trade and trade your plan”. This is my take on exactly that and I hope you gain something valuable from this post.