Trading with Median lines is a system and a leading indicator suitable for Swing trading.I am following this strategy for Nifty and Bank Nifty with good results.Those interested to trade with Charts and Price action to analyse target price, support and resistance levels will find this strategy very interesting.

Feedback welcome!Happy trading...

Sunday, September 18, 2011

Entering Short term Trades

State Bank of India Chart example
Let me run through a recent 60 min chart with entry and exit points for trades using Median lines and the concept of Warning Lines.

I have drawn an ascending Pitchfork from a low in August through the mid point of a retracement swing after the price bar crossed 38.2 % R.Buy position entered when price crosses signal bar high.Target reached very close to median line.
Afterwards, the price has moved in a range, a ledge like formation.two probabilites at this point- Breakout above range, continuation of Long trade / New buy position.
Taken a long at the breakout price above the range which happened within the channel, booked the position with the stoploss .
Breakdown of range- Entering Short position.
In this case, price moving out of the Ascending pitchfork and breaking down confirms a good entry point for the Short.

The next Pitchfork , now Descending is drawn.Price hits the Median line and moves further down towards the Lower Median Line Parallel.Part profit booked for Short.

Here I'd like to introduce another concept of median line followed.This is called as warning lines for the extensions of the swings beyond the parallel Lines.This is drawn with distance equal to the distance between the Lower median line parallel and the median line and Upper median Line parallel.
These are also support or resistance lines similar to the LMLH and UMLH and are drawn when price moves out / breaks out of the channel.
In this instance, the price moved down to the first warning line for the profit .

A blue Pitchfork is drawn with Pivot C from the low point of the previous larger swing.( as clear minor swing pivots were not formed in the chart.)
Now,Price has climbed up upto the Blue median line where resistance is expected.
The next few price bars close will determine the next trade decision.The probability exists that it can climb upto the red UMLH where again it meets up with resistance.
So in both cases , short trade entries is being looked out for.

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