As I’ve dug more into technical analysis, it seems a style that I am gravitating toward is just buying one big wave up, then staying put on those sideway moves and wait for the next breakout.
To succeed with this strategy I think there are 4 things that need to be mastered …
- Identifying a true breakout
- Not getting into false breakout
- Knowing when to get out when the trend is over
- Knowing when to keep going during a small pullback
Signs to distinguish between true/false breakouts (1,2)
MACD – it should be in the green when breakout is happening
Volume profile – it should be light on the selling and high on the buying during consolidation for a real breakout
Topping Tails – it shouldn’t topped the resistance too many times during consolidation
Signs to distinguish between minor pullbacks and end of a trend (3,4)
MACD – If it’s red it’s likely over. If it’s green it’s likely it might be a minor pullback but need to watch close.
Volume profile – light on the selling and high on the buying for minor pullbacks; high on selling and light on buying for trend end
EMA9 – if it crossed over it’s very likely it’s over.
SMA5 – should use SMA5?