Have you ever been in a trade after a gap up where you bought the dip and then it kept selling? In this video I talk about that exact situation that happened to me on PANW. The important thing to remember is to recognize when that happens and how to find a good risk reward. I use vwap and timeframes to help with that.
Here is a video where I talk about this. Scroll Down to see the process I follow.
The Process I use to recognize I should flip.
Follow these steps during the first hour. It can also be used in the afternoon after vwap fails during lunch to early afternoon.
- Define support/resistance from premarket action. IF you had a large spike on the open and testing support/resistance and it breaks, continue with this process.
- Identify where the retrace starts and look for a retrace to vwap during first hour, check if it is at the support/resistance. if it is, probably 70% chance it will reject and that will be a great entry.
- Define max/loss and risk when sizing as usual. If doing options, consider a 30-50% loss
- During the retrace consider using the new support/resistance to identify a strike price if trading options.
- Place your order entries during the vwap test.
- Hold for the end of the day or meeting targets.
- If trading options consider selling half at 100% gains. This way you can’t lose. With shares, sell the amount that will cover you in case your stops get hit.
- Consider letting the rest ride until a BIG parabolic like move.
