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As I expected, today gold stocks rebounded sharply from their oversold levels. The intraday price action in Glamis Gold is a good example of how one can key off longer term technical indicators but trade in a very short time frame intraday. This provides a context above and beyond the usual short term entry signal. Such layering of signals increases the probability of a profitable trade. As well, by trading in a smaller timeframe risk can be defined more narrowly - which in turn allows for potentially higher +R trades.
This morning, Glamis gapped up with a wide range and positive candle. The second candle provided an opportunity for an entry (buy above green line) with limited risk (stop loss below red line). If you look closely you might notice that the low of the third candle actually was below that of the second candle. However, since this low was made before the entry, the stop loss would not have been triggered.
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