In the world of trading, one of the most valuable skills a trader can possess is the ability to spot chart patterns. These patterns can provide traders with insights into market trends and potential profit opportunities.
We want to share our experience in years of trading with some of the best pieces of advice and chart patterns to start trading in 2023.
Before the trading session…
Checking a watchlist every morning is a critical part of successful trading. By watching stocks that have seen recent gains of more than 30%, you can spot opportunities to make profitable investments.
To properly analyze these stocks, traders should look at data points such as institutional ownership, float, volume, short float, news, financials and historical performance to determine how likely it is that the stock’s value will continue to rise.
By taking the time to assess such stocks before investing thoroughly, you can reduce risk and increase your chances of making money with consistency.
The chart pattern for trading in 2023
A successful trader is able to identify and use specific chart patterns to make profitable decisions.
The “gap, extension, pop, and fail” pattern is one such example, in which a trader looks for stocks that have had an opening gap of at least 5%, then made a quick run up of over 10% during the day, followed by a price drop of at least 5% within 2 days of its initial opening.
By identifying these patterns and determining the underlying market capitalization, dilution, float and volume, you’ll more insight into how likely that trade will be profitable.
Quick tip: having plan A and B also helps you stay prepared in case the trade does not go as expected.
More than a simple chart pattern
Consistent and profitable trading is not just about identifying chart patterns, but also requires a strong understanding of the:
- structure of the market;
- price action;
- tape reading;
- risk management.
Market structure enables traders to anticipate price movements and identify opportunities for trade entry or exit.
Price action helps traders determine the current momentum of a stock, as well as its buying or selling pressure.
By reading tape accurately, traders can look for clues showing how other investors might respond to specific news.
Incorporating risk management into a trading strategy will ensure that any potential losses are minimized. The ability to spot chart patterns is a valuable skill for any trader, and the gap, extension, pop, and fail pattern is one of the best chart patterns to trade in 2023.
Follow our chatroom and mentoring programs to gain a better understanding of the market and potentially profit from it.
Disclaimer: these articles are for educational purposes only. Market analysis, prices, news, trade ideas, or any other information within this site or the chatroom is not investment advice.