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Since I only made 1 trade today, I thought I’d combine my usual 2 posts into 1.

Let me start by saying that while the setup was very nice, It came within 1 tick of hitting my stop. Just goes to show you how trading can be a game of inches sometimes.

The setup was really pretty straight forward. There was a very nice looking Head & Shoulders pattern that formed on the 55-tick chart. This is what originally caught my eye. But what forced my hand was the 610-tick & 2-minute charts.

While the 55-tick H&S breakdown was occurring. There was a beautiful looking momentum divergence on the 610-tick chart. To add even more fuel to the fire, the volume on the most recent 2-minute bar was nearly double that of the previous bar.

Looked like 3+ convergence to me so I went with it & threw my stop up over the most recent pivot high. It actually ended up being 1.80 points away which was larger than my typical 1.50 point stop, but if i was going to take this play that’s where the stop HAD to go as that’s where the price would have to go in order to prove me wrong.

This is a subtle, but very important point. People who are using fixed price or % increments indiscriminately are shooting themselves in the foot. Had I done so here, i would have been stopped out for a 1.60 point loss instead of a 1.60 point gain. Yes it can be taken too far, but a little flexibility is key in this regard and can prove quite valuable in the long run.

There are a couple of ways you could have exited this trade. The standard method on a H&S breakdown is to take the distance from the top of the head to the base of the neck and project that downwards on the breakdown. That was what I originally had targeted but once i was able to, I threw up a FFF- and took a conservative exit once my Net Daily Trading Goal had been hit.

And since I still had some tweaking to do to my new trading PC, I was happy to be done within 30 minutes today.