In the previous blog, we touched on the mental part of trading and trading psychology. We also discussed visualizing the trade. One way to visualize a trade is to look at the chart and identify your entry, stop and target. To improve this visually add lines and indicators to your charts.
Take a look at the NVDA chart below. Do you see a trade setup? If you are new to trading, you may not see a setup.
In the next chart we have added the Simpler Trading Squeeze indictor at the bottom. We also added a blue line that indicates the entry price just above resistance. The red line is the stop price, which is under support. The green line is the target price, which is a 10% profit point. Also, notice that the squeeze has just fired off to enter a long trade. Now that we have added these lines it is much easier to see if there is a trade and is it a trade you want to take. You can also now visually see the Risk Reward Ratio, which is just above 1.5:1. Meaning there is potential to make $1.50 for every $1 at risk if price goes to the target.
The next picture shows another trade setup example using the UAL chart without the squeeze or lines. Do you see a trade setup?
Now let’s look at the UAL chart with the squeeze and lines. There is an entry above recent resistance. However, you will also now see there is a lot of resistance between your entry and target. This trade may have difficulty breaking though the resistance to reach the full 10% target. Also, the squeeze fired long over 20 days ago and appears to be losing momentum.
Remember to visualize each trade. Just like Jason Day does before each shot on the golf course. Also, it is not the number of trades that you take, it is the quality of the trades. Wait for the trades with the highest probability of going your way.
I hope this was helpful.
Learn more from Tucker Stipe and get daily trade recommendations, market commentary, & analysis at Simpler Stocks.