India Markets

Having the Right Point of View When Trading Part 2

brandonwendell
Brandon Wendell
Instructor, CMT

To continue on my article from last week, I wanted to demonstrate how I use the triple screen trading to enter into a trade. I have selected an intraday example but this technique can also be applied to longer term trading that would involve holding overnight positions and decisions based on larger timeframe charts. Remember, I first select a trading timeframe to plan and execute my trades. In the chart below, I have selected a chart of Axis Bank on a five minute interval.

Trade chart of Axis Bank 5 minute interval

On the morning of June 18th, AXIS formed a supply zone. I have previously discussed how I select and draw these areas. If you are not familiar with them yourself, then be sure to get yourself enrolled into one of Online Trading Academy’s classes immediately. This is one of the most basic and important tools of trading. I am looking to sell into these supply levels in downtrends.
Enter the perspective chart. Remember from last week’s article, the perspective timeframe I use is related to my trading timeframe by a factor of five. I have chosen the 30 minute chart to look for overall trend and to see if there are any major demand levels in my way that would prevent this trade from being profitable. Looking at the 30 minute chart of AXIS, we can see that there is a confirmed downtrend and no demand except for my price target for the intraday trade. Additionally, we could look to technical tools such as the pivot points to increase the odds for success in shorting. If I didn’t look at the proper perspective, I may have tried to go long with the short term timeframe trend and would have lost money. With the bigger picture on my side, I have a higher probability for success in the trade.

Trade chart of Axis Bank 30 min interval

Now I need to properly time my entry to the trade. I could simply place a limit order and wait for the entry price to be reached. However, if after analyzing and planning my trade I need some additional confirmation prior to entering, I can use the timing timeframe to enter at a great price with confirmation that my trade should work out. Looking at the one minute chart, (one minute is 1/5th of the five minute chart), we see that the supply level can be narrowed on the smaller time frame chart. Additionally, you can look for negative, bearish divergence on an indicator. Once you have entered into the trade, the one minute chart gives immediate confirmation of success with a lower high and lower low on the following candle.

Trade chart of Axis Bank on a 1 min interval

Once I am in the trade, I will only focus on the trading timeframe for my trade. Looking at the smaller timeframe after entry will only make you see the small fluctuations that will scare you out of great trades too early. Be sure to only use this timeframe to assist you in entering the trade. For more information on how to properly use this triple screen system, enroll in Online Trading Academy’s Professional Trader Course. In that course we examine using multiple timeframes for proper trading as well as many other tools to help you become successful in trading.

Until next time, trade safe and trade well!

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.