Do you know why beginner day traders should learn the ABCD pattern? FACT: Starbucks says it offers more than 80,000 drink combinations, and the horror doesn't stop there.
Have you been in line at Starbucks and not even bat an eye at the person in front of you ordering a "grande, skinny, half-fat, soy latte at 170 degrees,"? You know something's wrong when you don't.
Sadly but surely, we've all become so accustomed to the hyper-customization Starbucks offers; and it's not our faults.
With so many choices, you're practically shamed into having your own special order. If "170 degrees" is possible, anything is.
Unfortunately, the Starbucks phenomenon can and does creep over when new traders try to pick a day trading strategy. With so many choices, you're overwhelmed before you get started.
Should I trade-off VWAP, use MA's, EMA's, what about Bollinger Bands? Someone mentioned something about Fibonacci - that sounds like pasta to me.
I wonder if the moon or the tides have any effect on the market? What the heck is a candlestick? And what about this hanging man formation or three crows?
What is one to do? In an attempt to prevent you from feeling like you need to create your own special trading strategy or hang yourself, here's one chart pattern beginners should focus on when they first start day trading: The ABCD Pattern.
Check out our trading service for more information on what to do and how to trade.
The following setup tends to emerge in the market at some point on many, but not all, days. By learning to recognize this trading setup, a day trader may take actions that could improve their chances of seeing a profitable return.
For beginners, one of the most basic and most uncomplicated patterns to trade is the ABCD Pattern. And from my experience, ABCD patterns have an extremely high probability of occurring in any stock, and I see them everywhere.
The ABCD pattern starts with a strong upward move - initial spike (A), during which the stock price reaches the high-of-day as buyers are aggressively buying.
Inevitably the buyers will want to take profits, so they begin to sell their shares. We end up seeing the spike, followed by a healthy pullback. And once buyers overpower sellers, an intraday low is established (B) as the price comes down.
You should still not enter the trade as you are not sure where the bottom of the pullback will be.
At this point, we are looking for the stock to show strength by setting a higher low (above point B) on the next dip. Once this higher low's established - which is now support at (C), we begin planning our trade with our risk at B.
In short, we are planning for the stock to break above point A, and we consider taking profits at point D.
Stock market training is important in order to be a successful trader.
Why don’t you start day trading with simple patterns that make sense like the ABCD pattern? It is simple, easy to understand and useful for day trading.
Avoid complicated strategies with mathematical formulas or calculations that involve geometry or statistics. And even with powerful indicators, the most successful traders never forget the basics: Keep it simple.
One thing to keep in mind: whatever your strategy is, it definitely doesn’t mean you’ll be successful trading it. At Bullish Bears, we understand this.
We want to whittle your 80,000 options down to 5. Stock trading is not an exact science, but Bullish Bears will help you unravel the unknown.
Learn the essentials in our free online trading courses. Then you can put everything together and be a great trader. Thanks for reading our ABCD Pattern post and stay tuned for most material focused on patterns and price action for 2020.