Tuesday, September 12, 2006

2 Hours to Profits

Well that's a bit of a stretch but if it got your attention then it's a successful headline. My reader, hi Mom, liked it so what do I care if you do or not. Anyway, as promised, here is the first chapter of using the 2-hour charts to develop trades.

The 2-hour charts provide a wealth of trading opportunities. Once you get a positive signal you can almost trade with carefree abandon - although I don’t care to even think about that because it hurts my head. Let’s review the bidding.

1. A Doji star suggests a bottom. The next day a hammer is printed in the 1 - 2 P.M. time frame. A purchase here at $24.00 can be held (overnight) for a $1 gain.

2. A Doji star suggests a bottom. The next day gaps up and the purchase can be made after the first 30 minutes or so at about 25.20. Sell again after $1 gain at the end of the day.

3. A gap down that immediately starts going up following four red candles of the previous day. A buy at $24.00 (again) can be sold at the red hammer end of day indicator of $24.60.

4. The previous day’s red hammer end suggests a wait and see but the next day starts out with a gap up, a brief pull back and then a follow through to the end of day. A purchase around $25.00 could be sold at $25.80 for a nice profit.

The 2-hour charts provide opportunities but you have to be patient and only take the trades that make sense. The reason that the 2-hour charts make sense is that once the trade develops it continues to run long enough to make a profit from it. Generally speaking we want to take the trade off a signal from the previous day’s close. A Doji or red hammer or even a white hammer below the EMA 8 is enough to keep us interested. In the third case (3) we will try to take the next day's start off the four red candles of the previous day.

Note that this time we didn't have any short sales, that's because in this example we didn't have any absolute top indicators. In future posts regarding this topic I'll show some shorts.

Needless to say (but I will anyway) this is just a set of suggestions - you must practice first before you use any of these ideas to try to make some money. But the 2-hour chart method is looking promising.

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