A trader explains his short-selling setup: a strong downtrend followed by a bounce and a capitulatory candle with a long wick. He enters when price retraces into the wick, risking ten points to catch the trend resuming downward.
This is my favorite setup because I love short. I hate an uptrend. So this is kind of like a continuation into a short-term downtrend. Let's say you have this. You have a strong move lower, strong move lower, and then you're getting that buy up, but it's not really going anywhere. So you bounced off of 20. You missed this entry. Now you have something like this, a stronger move, like a capitulatory move higher into 80. And then that candle starts doing something like this, a long wick with a small body. Then you have a move like this. So now you're building that Lowercase H. It's a market structure pattern. Okay. The actual entry would be the cross section. Got you. Then you have this candle, and it opens, and it goes back into the cross section of these two candles, and then it closes something like this. Your entry would have been off of eighty on the initial tap and rejection. So this would be your entry right here. You mapped out the cross section. It touched it. It reversed. And now you have a ten point stop. Let's say it's at eighty seven now, and your entry is at seventy seven. And ideally, this candle closes, and the next one goes back, and now you're back. Into a trending market and you built out that lowercase H and you're ready to go down more.
