Hi all,

Have a look on today Dow Jones chart before 14:30

You can see that in 12:30 the high was 10451 and low of 10420. The next bar the high was lower and the low was higher which gives me some indication that a strong move is on the way. Nothing is really happening on the next two bars.

So how do you trade this? there are two options:

1) Go with the trend.

2) Ignore the trend.

In option one we switch to a different time frame to check the trend. I just multiply the current time frame by 4 or 5. So if I am using 30 minutes chart I will switch to 2 hours chart and if I am using daily chart I will check the weekly. Now that I know the trend (in this case it is up) I will put a buy order a bit above the recent high. In this case it is 10451 so I will put my order level at 10455. Because the trend is up I will ignore the down side.

In option two I don’t really care about the trend. This is more for quick trades where you try to catch a small movement and you don’t care if it is correction or changing of direction. In this case I will put an order to sell at 10415.

Target & Stop loss? it is 30 minutes chart so the target should be quite small and so the stop loss. But the stop loss shouldn’t be very tight because you can stopped out and miss the move. In this case I would put 30 points stop and target of 40.

and look what happened at 14:30:

You can see that in 14:30 there was sharp movement down which broke the 10420 level. This trade would have been successful if you were using option 2 and ignore the trend. If you were using option 1 and stick to the trend nothing would have happen for you today.