Best Trading Setups for Long Term Profit

Thursday, April 19, 2012

Best Trading Setups for Long Term Profit

Trading with price action can make very good income for the sophisticated investor, and can make good profits on many FX pairs, options and commodities. In this item we will describe selected few of the most consistent stock set-ups for most profits.  

Pattern: Channel

The channel is a classical set-up that is seen on many Forex pairs and commodities for dozens of years and produced consistent gains.

Channel pattern is built of 2 parallel trend lines that trend in the same direction. We enter long positions in a climbing channel and enter sell positions in a declining channel, to ensure we don't enter trades against the current trend. We may also take pullback positions when the set up is broken in the opposite direction, as it usually helps traders gain from the new trend (reversal) at an early location.  



Pattern: Support and Resistance Pullback

The pullback is one of the best stock signals, as it has win rate of 70%+ on various Forex pairs and stocks. The logic behind pullback is that stock price breaks through a certain support\resistance boundary and tests the boundary after the breakout. This allows traders to join the movement at a very tactical point, with tight stop loss and very high reward.

The pullback occurs in many stock patterns, such as the Double Top, Descending Top, Broadening Top, Head & Shoulders and dozens more.  

Pattern: Moving Average Test

The moving average test occurs when price bounces off the MA in the course of a strong trend - it is a retracing process that usually results in the resumption of the trend and a good location to join it. Make sure that the trend is strong by observing the angle of the MA and making sure that it is sloped and not flat (which confirms weak trend).

 Pattern: Double Top

The Double Top is a highly consistent chart pattern that reaches 80% hit percentage in many charts, and is considered a very profitable stock set-up. Double Top occurs when price touches the same resistance price twice, drawing a price-action that looks similar to the letter M. Trade is confirmed when stock price breaks the neckline downwards and starts to move downwards, and we could join that trend at the breaking of the neckline or at a pullback. All of those trading methods are accurate, have high success rate, and can be tested on any FX chart, stock or commodity.

You don't need to be a stock trading professional to make money from these chart patterns - just follow the basic guide-lines and you will quickly see that gaining money from stock trading is not so hard. Follow the systems described here and do not deviate, as it will most likely lead to losses. Choose a pattern, follow it and master it - this is the easiest method for trading success for the long-term.

 
Author: Steve Sollheiser

He is a writer and a stock trader. Visit his site StockChartPatterns.org for more articles about trading chart patterns.

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