The Short-Term Pricing Pattern That Really Works

Every trader wants to know more about short-term patterns and indicators.

And I get it.

When you’re trading in a really tight, short-term window, you have to be able to turn on a dime. You need rock solid signals that you’re looking for to tell you when to move.

One of the easiest patterns to learn and one of the first that I started using is the U-turn strategy. It’s a very fast reversal pattern that works wonders with volatile stocks, futures, currencies and commodities.

 

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At the most basic level, the U-turn pattern is a short, one-day reversal away from the main trend. When the pattern is setting up it looks like the market is suddenly breaking out in the opposite direction from the trend. However, as the day continues the market quickly changes direction and closes back in line with the main trend.

In action, what’s happening is that buyers are coming into the market over the course of the day, noticing that the stock is substantially lower than its fair value, and snapping up shares. Over time this action brings it back in line with the main trend.

You need to move quickly when you see this type of pattern because they don’t last very long. It’s a very short-term trade that’s designed to take advantage of stocks and other markets that are temporarily out of balance.

The next day is entry day and this is the most important time because this strategy moves fast and you want to make sure you don’t miss the momentum coming into the market. The entry point in the example above is above the high that was made on the signal bar which is the gap down bar.

The best trades get filled at or near the opening bell so you probably want to place a buy stop order a few ticks above the gap day high price. This way your trade will be filled automatically when the market trades above the gap high day.

One important word of caution, do not take signals that occur after the first 2 hours of the trading day. This is a day trade so you want to make sure you have plenty of time for the trade to develop and achieve some degree of profit.

You can see in this example the entire sequence from beginning to end.

Keep in mind that you need a strong trending market for this set up to work. I always look for trend lines that slope above 20% either up or down.

As the stock pulls away from the trend it appears like it’s breaking down for a short period of time. Quickly the stock reverses as buying comes in and closes near the upper range of the trading day.

This is the type of set up you should be looking for on your daily charts after the close each day.

Remember that this set-up occurs quickly and disappears just as quick, so you have to find them and take advantage of them as soon as they appear. If you are having trouble spotting these on your own or simple don’t have the time to do it, check out our 14 Day Breakout Code.

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To sum everything up: the U-turn strategy is one of the best short-term trading strategies for quick profits and easy management that I’ve found.

And if there’s one thing I hear a lot from beginning traders, it’s how to make use of options…

…It’s not the most straightforward part of the game, but it’s one that can be very profitable if done right. In very basic terms, when you purchase a call option, you profit if the underlying stock goes up and you MAY lose money if the underlying stock moves lower.

That’s because you don’t own the actual underlying asset. Cool, right? But here’s how to use this info as a trader…

 

This article is supplied courtesy of BookerWealth.

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