PB&J: SHADOW-30
If you are new to trading, then start with this pattern!
It is easy to identify, easy to learn, and easy to trade.
What more could you ask for?
HOW TO TRADE THE SHADOW-30 CHART PATTERN
This can be an "everyday" pattern because of its reliability.
It is easy to spot and simple to trade.
THE SETUP
The name Shadow-30 refers to a "shadow" that slices through the "30" period exponential moving average.
This looks like a Hammer on the chart but it doesn't have to be perfect to be considered a Shadow-30.
- The color of the real body is not important.
- The shadow on the chart flushes other traders out of their position.
Note: There is nothing special about the 30 period moving average. It is just a reference.
Look to the left on the chart to determine support and resistance.
When you are trading any kind of long lower shadow or Hammer pattern, always look for volume to be higher than the previous day.
- This suggests that many traders were shaken out and demand is picking up.
- This is important!
THE ENTRY
If you are able to trade during the day then buy on the day of the Hammer near the end of the day. You do not need any kind
of "confirmation" or anything else. You only need to see that price is at a support level and that demand
is coming (volume). That is all the confirmation you need.
If you cannot trade during the day then place your buy stop above the high of this Hammer day. The next
day you'll have to check to see if your order gets filled and then place your stop loss order. You could also use a bracket order.
THE STOP LOSS ORDER
There are two options for the placement of your stop loss order. Each has advantages and disadvantages. You decide what
is right for you.
Option 1:
- Put your stop under the low of the Hammer. The advantage to this is that your stop is far away from your entry price
and you will not likely get stopped out prematurely. The disadvantage to this is that because your stop is so far away, you will
have to buy fewer shares in order to comply with your money management rules.
Option 2:
- Move down to the 1H chart and put your stop below the support area closer near the real body of the candle.
The advantage to this is that you get to buy more shares because your stop is closer to your buy price. The disadvantage to
this is that because your stop is so close, you may get stopped out more often, before a big move happens.
TAKING PROFITS
When you are trading wide range days like Hammers you will find out that many times the chart will trade sideways for a day or two. That is fine.
You are already in the trade just waiting for other traders to enter. Also, the days that follow a Hammer are typically low volatility, narrow
range days like Doji.
Be patient! Do not get anxious to move your stop up. Wait for price to actually move in your favor before you begin trailing your stop.
Once price moves in your favor, then you safely begin to trail your stop loss using your favorite exit strategy to lock in profits.
TRADING TIPS
Focus on those charts where the real body of the candle is close to the 30 EMA. You want as many traders as possible shaken out of this
before you get in.
This setup is reversed for short positions except now your are looking for charts with a Shooting Star pattern through a declining 30 EMA.
Give more weight to setups where price gaps away from the previous candle to end the day in a Hammer.
Always look to the left on the chart to make sure price is at a significant support or resistance area.
WHEN GOOD CHART PATTERNS GO BAD
Yes, you will have losing trades with this pattern.
There is no pattern that will guarantee all winning trades!
But with proper money, trade, and self management, you can do very well with this setup.
If you are new to trading, then start with this pattern!
It is easy to identify, easy to learn, and easy to trade.
What more could you ask for?
HOW TO TRADE THE SHADOW-30 CHART PATTERN
This can be an "everyday" pattern because of its reliability.
It is easy to spot and simple to trade.
THE SETUP
The name Shadow-30 refers to a "shadow" that slices through the "30" period exponential moving average.
This looks like a Hammer on the chart but it doesn't have to be perfect to be considered a Shadow-30.
- The color of the real body is not important.
- The shadow on the chart flushes other traders out of their position.
Note: There is nothing special about the 30 period moving average. It is just a reference.
Look to the left on the chart to determine support and resistance.
When you are trading any kind of long lower shadow or Hammer pattern, always look for volume to be higher than the previous day.
- This suggests that many traders were shaken out and demand is picking up.
- This is important!
THE ENTRY
If you are able to trade during the day then buy on the day of the Hammer near the end of the day. You do not need any kind
of "confirmation" or anything else. You only need to see that price is at a support level and that demand
is coming (volume). That is all the confirmation you need.
If you cannot trade during the day then place your buy stop above the high of this Hammer day. The next
day you'll have to check to see if your order gets filled and then place your stop loss order. You could also use a bracket order.
THE STOP LOSS ORDER
There are two options for the placement of your stop loss order. Each has advantages and disadvantages. You decide what
is right for you.
Option 1:
- Put your stop under the low of the Hammer. The advantage to this is that your stop is far away from your entry price
and you will not likely get stopped out prematurely. The disadvantage to this is that because your stop is so far away, you will
have to buy fewer shares in order to comply with your money management rules.
Option 2:
- Move down to the 1H chart and put your stop below the support area closer near the real body of the candle.
The advantage to this is that you get to buy more shares because your stop is closer to your buy price. The disadvantage to
this is that because your stop is so close, you may get stopped out more often, before a big move happens.
TAKING PROFITS
When you are trading wide range days like Hammers you will find out that many times the chart will trade sideways for a day or two. That is fine.
You are already in the trade just waiting for other traders to enter. Also, the days that follow a Hammer are typically low volatility, narrow
range days like Doji.
Be patient! Do not get anxious to move your stop up. Wait for price to actually move in your favor before you begin trailing your stop.
Once price moves in your favor, then you safely begin to trail your stop loss using your favorite exit strategy to lock in profits.
TRADING TIPS
Focus on those charts where the real body of the candle is close to the 30 EMA. You want as many traders as possible shaken out of this
before you get in.
This setup is reversed for short positions except now your are looking for charts with a Shooting Star pattern through a declining 30 EMA.
Give more weight to setups where price gaps away from the previous candle to end the day in a Hammer.
Always look to the left on the chart to make sure price is at a significant support or resistance area.
WHEN GOOD CHART PATTERNS GO BAD
Yes, you will have losing trades with this pattern.
There is no pattern that will guarantee all winning trades!
But with proper money, trade, and self management, you can do very well with this setup.
