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When is a Swing High Not a Swing High?

August 7, 2012

The first opportunity today was at the open, although price annoyingly stopped short after hitting bids a tick above my buy limit, and so I wasn’t filled. There’s often a trade sets up within a few minutes of the open, as the increased volatility around this time almost guarantees that a support or resistance line or the EMA will be hit. It is quite common for me to use an average for my order location for this first trade, as it often isn’t possible to reference a trend-line.

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Daytrading Chart 7th August

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Still without a workable support line I waited for an oversold RSI reading at the EMA to get long. I exited at prior highs for a 2.25 point profit.

My second trade used the support line to locate another buy order, but was stopped out for a 1.5 point loss, leaving me with 0.75 net for the day. The area I have highlighted in grey is interesting. Should the first one-bar rally be treated as a lower swing high here, and did the second one-bar rally shortly afterwards present an opportunity for shorting? For me the reason not to short was that the reward for a move back down to the lows wasn’t sufficient to justify the risk. If you aren’t totally comfortable identifying price swings on a discretionary basis then a tool like the Key Levels indicator will offer a more objective interpretation – I’ll discuss this further tomorrow.

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