I have gotten a lot of questions about my trading technique. So here is my answer.
I like trading impulsive moves out of corrective structures. I can get precise entries and a big move. My take profit right now is an impulsive move out of the corrective structure, and I am trying to expand my comfort zone to trail my stop.
So what about entry? How do you know when the corrective structure is breaking down, and an impulsive move is coming?
Well, I decided to do this scientifically, and I started taking dozens of screen shots, from all currency pairs, and from all times (5 minute to weekly). I have classified corrective structures into 4 types,
Rectangle/Channel (equal), Expanding, Contracting, V-top/bottom.
I can already start guessing what type of c-structure will start forming with one corrective pullback but that is more of a scalping system. My bread and butter is waiting for two counter-trend pullbacks. Then I look for a partial decline/partial advance. I saw this idea in Bulkowski's pattern book, and after looking at each of my corrective structure screen shots I have created a system for trading this. Basically, a partial decline/advance is where price doesn't go to where it should go to given the structure. For example a head and shoulders is in my mind just a busted rectangle.
I dug deeper and realizing that the partial decline/advance also has a tell/tale sign.
Ok, I realize this is hard to understand without a chart, so I should post some charts. I am a bit lazy to post all my screen shots, but if you'd like I can either share my documents, or perhaps when I have the time I can post a few examples from each category.
If there is interest, I can continue this post
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