As I wrote about here, there is a simple 3-day pattern that I like a lot. I like a lot again the last several days.
In nutshell:
- Day 1) Closing price is below the low of the previous day
- Day 2) The next day involves no action
- Day 3) If the high today takes out the high for Day 2, then buy long and sell at the first profitable close (a stop-loss order is recommended but where to place it is an entirely different topic and one that might require a little experimentation on your own).
If the high for Day 3 DOES NOT take out the high for Day 2 then the pattern is invalidated.
Figure 1 displays all of the Day 3’s on which there would have been an entry signal in the eMini S&P 500 futures contract.
Last two signals:
#1
- Day 1) On 7/24 ES closed below the low on 7/23
- Day 2) 7/27 serves as Day 2
- Day 3) ES opens on 7/28 above Day 2 high at 2071.25
ES closes on 7/28 at 2087.25
(2087.25 – 2071.25) * 50 = +$812.50 per contract
#2
- Day 1) On 7/27 ES closed below the low on 7/24
- Day 2) 7/28 serves as Day 2
- Day 3) On 7/29 ES trades above Day 2 high of 2089.00. Buy at 2089.25 sell on close at 2101.50.
(2101.50 – 2089.25) * 50 = +$625 per contract
Summary
Like every other trading method I know of, it sure is great.
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Especially when it works…..