How do we know that a flag has formed fully and that a breakout is imminent, i.e how many candlesticks denote a typical flag?
The flags (consolidation patterns) we like are generally 3-4 bars/candles (days) long.
Sometimes they can go for a bit longer, but that’s a good ballpark.
We’re looking for easily recognisable, neat, and compact flags or consolidations, where the difference between entry and Initial Protective Stop is small, thus your 'Practical Risk' is small.
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What is the difference between practical risk and theoretical risk?
The below example will illustrate the difference between practical and theoretical risk. Say you buy 10 stocks at $15.00. THEORETICALLY, the stock price can go to zero tomorrow and you can lose all the money you have invested in this stock, which is ...
What do you consider a "properly constructed breakout?"
What we mean by that is a breakout that is preceded by a flag pattern, consolidation, or a clear support (or resistance) area. The chart patter should be neat and tidy, and not regularly be subject to gapping or huge daily ranges. This should be ...
If the entry price of the flag or consolidation is hit, but then the market just starts moving sideways not hitting either entry or stop loss. Is there a point where I can say this is not the typical flag trader trade and just exit?
Yes, it's typically where it stops being a flag or consolidation, becomes range bound, and other opportunities look better. Also, watch to see if the OVI remains in the direction of the dominant trend, and the presence of Big Money Footprints, ...
Is there a chance on a higher profit, if either the size of the flag, or the size of the consolidation is greater than a stock with a lesser size?
You want to stick with neat looking flags or patterns where the consolidation or range of the pattern isn't too deep - otherwise there is too much distance (your 'Practical Risk') between your entry and optimal stop.
The trades I have put on have not worked, I’ve made some losses, what am I doing wrong?
The only way you can lose money with these methods (if applied correctly) is on a false breakout. In other words, you get triggered into a trade, and then it retraces and stops you out before P1. This scenario is highly unlikely if: A) The flag or ...