Question About Trading Strategy – Buy and Sell Sequence

Well in the first pic, you have some very nice trending bull bars closing near their highs...2nd pic you have a ii forming (or a 3 bar hoagie)...need more context on the 2nd pic

Thanks for the feedback!

From my understanding, the second image actually shows a stronger buy signal than the first one.
Are you saying that the ii pattern alone is enough to justify a short trade, even in the context of that strong uptrend?

Just trying to make sure I'm not missing something here.

The first setup, has several bars on the right of the setup, whereas the second setup is on the leading edge. Of course, you can't discuss setup in hindsight. there could easily be continuation in the second setup after the bars you highlighted in blue.  However, the bars do look like they hit a major resistance on the upside so there doesn't seem to be a good chance of going up further in the immediate 1 or 2 bars.

Ok.  Might ruffle a few feathers here.  Please have a little patience.  Who said the 2nd graphic was a sell?

I'm sorry but just no.  Especially in 2025 where you will get absolutely run over (and I will explain in a moment).  051625 - the market went up - - AGAIN!  Statistically this is not supposed to happen.  Wait, the news articles this morning have indicated that the launch of the market since the April low hasn't happened since . . . . yesterday?  No. . . .  Last week - Nope.  This decade?!!  Nope.  1982!!!  Where were the "experts notice to sell?" . . . crickets. . . How about to buy?  crickets again.  Must be great to be an expert . . .

This is where trading and predictions get a little messy.  Trading is not about prediction.  On YouTube and discord forums you will note individuals "predicting" what will happen next - - -> Sometimes they are correct.  This is an illusion of trading and is not the skill!!!  Sorry.

So, how do you handle the second graphic?  More importantly, how would Al handle this (and this is the real question)?  First, Al is already long and is looking to profit/reduce risk. . . .   How do you know?

1.  What is the state of the market?  Always In Long (well that was easy).

2.  What type of market?  Small pullback bull trend from the open.  Predominantly microchannel.  Yeah there has been a very small correction but let's get serious now as the pullback is doji, doji and those bars correct maybe 5-10% of the up move.  On a smaller timeframe you'd be looking for a H2 trap situation.

3.  Have breakout points been retraced?  Nope.

4.  Is this the open? (probably).  The key about the open is that at 10 am, 10:30 and 11 are often turning points in the market.  But this doesn't "make it so".  Can't see what is "to the left".

5.  Have limit order bears made any money?  No (this is a first prerequisite that things are slowing down).

6.  Have stop order bears made any money?  Presupposition that 5 has to be true.

So, from a bear perspective there is nothing to even look at.  Now if you are bullish, where is your stop?  Yeah - very far away.  There is a balancing between probability and where that stoploss has to go to be reasonable.  That stoploss provides a probability indication.  Where would the bear stoploss be if you took the trade?  Most would say the high of the pattern.  Pretty close right?  This is an indication that the probability would be fairly low (and this can be reviewed in comparison to where the size of the bull stoploss is).  In actuality to, for this to be high probability for the bears, the stoploss has to probably be very far above the high of the pattern.  Perhaps the size of the spike up (but that hasn't finished).

The scale balance:

Bulls -> high probability continuation & large stop. 

Bears -> low probability of turn and small stop.

Reviewing the 6 points though, the only aspect which might yield a bear potential is item 4 and an exhaustive trend from the open because of parabolic pattern.

So it isn't about prediction and reading "who is winning and making money" is the key.  A lot of times both sides can make money.  In the second situation, only bulls are profiting and anything else is a prediction/guess.

Letting the market move first can save a lot of headaches.

A little fun.  Hopefully helpful and good trades to you!

(yes, some youtuber is going to say they shorted the wick of the larger candle and made money when prices came back down.  But they always leave out the probability of things.  People do win the mega millions lottery . . . all of the time!  The real question should be - was it you? 🙂 ).

Thanks for the detailed breakdown, really clarified things. I was overvaluing the ii pattern without considering who’s actually making money in that context. Great insight on probability vs prediction. Appreciate it!