One Chart, One Line - The Key to Simplifying Your Trading
How in the world can a chart only have one line and tell you anything about a stock? Let's take a look...
The S&P 500 found a very strong double top at the peaks of 2002 and 2007. The break of this line created the longest bull run in the history of the stock market. "Okay, it's a coincidence... Technical Analysis is luck" How about we check out a few more? (Skip to Conclusion)
How can you implement the one line, one chart into your trading strategy?
Find a key spot in the chart where price reacts. Look for candles finding either support or resistance in one specific area. Above that area, the chart is bullish. Below that area, the chart is bearish. Okay... maybe it's not that easy. This is where you bring in your technical analysis skills. Are we above that key support area? If so, I'm only looking for specific bullish setups and entries. If we are below that area, I'm only looking for short setups. This significantly increases your odds of being on the right side of a trend especially mixed with other strategies such as EMA trend analysis. Lastly, we must look at the highest risk/reward setup using one line. If price breaks above this key area of resistance, it is likely to provide support in the future. Buying the initial retest is likely one of the top trading strategies to exist. How come? Buying a pullback has little risk as if the price moves back through that area, you can quickly cut the trade. The upside however is unlimited. With one line and proper risk management, you can find the best trade of your career.