Trading Rules Lesson 2
1. Most of the time in trading is spent waiting – waiting for prices to reach favorable levels. The market predominantly remains in a consolidation phase, and when a trend occurs, it often happens in an instant. Utilize limit orders to anticipate potential price levels by placing orders in advance or monitor the market closely, entering at an appropriate position when the price reaches a suitable level using market orders.
2. Use support, resistance, trendlines, and Fibonacci retracements to identify entry points. Typically, when the price touches these levels, there is a higher probability of a reversal. Take advantage of these characteristics to generate profits.
3. Different timeframes on candlestick charts, such as 15 minutes, one hour, four hours, and daily, serve as technical analysis time scales. The 15-minute timeframe provides more detailed information for precise entry points, especially suitable for short-term trading. The four-hour and daily timeframes offer a broader view of the overall market trend, and sometimes stronger support (previous low) and resistance (previous high) levels become highly effective upon retesting, often indicating a trend reversal!
4. Identify two candlestick wicks that can be connected to form a trendline. This trendline can be used to predict the next price level, i.e., the extension line and the third intersection of the candlestick wick. The probability of a trend reversal is usually higher when this position is touched (as shown in the diagram).
5. Leveraging the reversal characteristics mentioned above, determine stop-loss positions and leverage size. For example, in the illustration, we choose to enter a short position at the price of 42,632 (marked by the red arrow). The stop-loss can be placed at 42,922. This is because, if the direction is incorrect, the price must first break through the orange trendline and the white resistance above – two hurdles – to protect the initial capital.
If aiming to limit losses to less than -10%, consider opening positions with leverage around 10-15 times, and each opening must be carefully calculated.
For taking profits, consider observing the support at 41,377 in the downward direction.