Probably the #1 question I get is about how I trade my signals. So, here’s an example.
First, look at price action. I drew a horizontal trendline at a low where price reversed. This was right at Alla’s Average. So we bounced off Alla’s Avg, and maybe next time we’d push through it. As price dropped back toward that level, note that the big traders (magenta dots) went net negative and were dropping. I put in an order to get short if price dropped below that level. Then I put the cursor on the cancel button in case volume pressure pushes against me, and I don’t want in anymore.
Well, price hits my level while volume pressure is still dropping, so now I’m in. When the bar closes, I get a short signal from the bid/ask/stoch signal. If I didn’t get the short signal to confirm the entry by the next bar, I’d get back out for break-even (hopefully grabbing a tick to cover commissions). I’m also looking for volume pressure confirmation, in that the big traders should continue to push down. They do.
Now it’s a matter of chosing an exit. I’ll start looking for an exit when the big traders step aside. Note that the magenta dots heading up is not enough. As long as they are below the zero line, they are net sellers… so it’s not urgent just because the dots are rising. However, in this case, we got a bit of a drop in price, but the magenta dots kept going up. That’s a warning… not the kind of divergence you want to see. It’s not sustainable. So, time to exit, or at least lighten the size you’re carrying short.
As you can see, it was right to take some profits, as price reversed, and the big traders continued buying.
