Momentum Indicators as filters for Upthrusts and Springs
This post will illustrate the use of momentum indicators as a filter and additional confluence to the Upthrust or Spring price action setups.
Even though I don't advocate trading the Stochastics alone I want to demonstrate one of the reasons why you may have it or another Momentum indicator.
This one is with the 14-3-3 Default settings, the 8-3-3 works as well.
Let's use the following 30-minute forex chart as our visual example.
Overbought Stochastics
As you see each time we had an Upthrust pattern the Stochastics was already in the overbought zone.
So you can use it as a filtering mechanism. If you monitor multiple forex pairs that are highly correlated you'll notice they often form a similar pattern.
Consider taking the one where you have the Stochastics confluence.
Sometimes that is my final decision criteria. Stacking more confluences in my opinion stacks the odds in our favor.
Entry bars
You may say: 'Where is your entry bar?'
The label Upthrust points exactly at the bar that closed below the previous high.
If you want more confirmation wait for 2 closes or look at the 1 hour chart for a candle pattern.
For sure the price you pay is a bigger stop loss, but there is always a tradeoff.
Do you want to be sure or do you want to have a tiny risk in relation to the reward?
That is a question each one of you should answer for yourself.
Collection of charts
This chart goes into my archive. I advise you to collect such examples of your favorite setups.
I want to have a visual reminder later of what works. Different instruments have different traits and price action characteristics.
Additionally, I want a visual reminder of what will happen if I leave my first runner and keep adding while the first one is still open.
Even if you don't take the first signal or the second as we were just at the beginning of the trend shift plus they are not so textbook ones - look at the last 3 entries, when the downtrend is already developed and the price stays below the 89SMA.
During such days and trends imagine what might happen to your bottom line if you add instead of fold...
I'd leave you with that thought in mind.
Happy hunting!
Yours truly,
The Spring Hunter
