How to Predict the Size of a Move Using the Trendline Tool
Read Time: 3 Minutes
Day Trading Lessons: 10/16/23 - 10/20/23
There was a barrage of economic reports, Fed speakers, and earnings reports this week. This caused some rather unpredictable price action - especially early in the week.
As a result, I traded with lower risk this week and I made it a point to be a little extra picky about which trades I took.
The plan worked well and I was able to end the week in the green while avoiding several traps that likely would have cost me in the past. I also walked away with a couple of "aha" moments:
- Reducing my risk really helped me calm my nerves and trade unemotionally; which are things that I've been struggling with lately. Moving forward, I will be quick to lower my risk when I feel my confidence slipping.
- From Monday to Wednesday, I only saw one trade setup that I loved and that ended up being the only trade that I took. That one trade also ended up being my best trade of the week and it was a big reason for my green week. I've talked about it before, but this is more evidence that taking a few great trades is much better than taking many good trades.
To finish out the newsletter, I want to share a little trick that I recently learned:
Using Trendlines to Predict the Size of a Move
Over the last few months, I've seen several traders use the trendline tool to predict the size of an upcoming move. I recently decided to try it out for myself and the results have been surprisingly reliable.
Here's a quick video where I explain how the trendline trick works:
That's it for this week. I hope you've learned something useful and I hope you have a great week ahead.
- Eric
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