The trading chart consists of three scenarios explained in the strategy of strat patterns.
- Trending up or down
- Inward price consolidation
- Outward price expansion
When you see the candlestick chart, you will always observe one of the above three price patterns.
Based on these scenarios and the strat patterns, I have explained the trading strategy in the previous post.
However, I will explain the Palantir Technologies lnc stock trading example using the strat patterns in this post. Using the strat patterns, I will also explain how we can profit from the market. You should also backtest the strat patterns to master the strat trading strategy.
Filter out the best stocks/indices.
In the strat trading strategy, the first step is to filter out the stocks or indices that follow the timeframe continuity principle.
I have chosen these higher timeframes:
- 8 hour
- Daily
- Weekly
- Monthly
First, apply the strat patterns indicator to the stock and indices chart to find whether all the higher timeframes are aligning. Then, select the ones that are aligned.
These are the stocks that are aligning:
- SOFI Technologies
- Gamestop Corporation
- Nvidia Corporation
- Palantir Technologies lnc
However, as you can see in the image below, Apple stock does not have full timeframe continuity. This is because the weekly timeframe is bearish while others are bullish.
The strat patterns indicator makes it easy to filter the best financial assets.
Use the corner timeframe continuity table to pick the assets with the same arrows up or the same arrows down.
- Bullish green arrows represent that the higher timeframe trend is bullish, and we will have to trade in the bullish direction on lower timeframes using strat patterns.
- Bearish green arrows represent that the higher timeframe trend is bearish, and we will have to trade in the bearish direction on lower timeframes using strat actionable patterns.
Find actionable patterns on lower timeframes.
The next step is to switch to lower timeframes and find an actionable pattern. If there’s an actionable pattern, you should open a trade on that.
I have checked the above-filtered stocks and found that a 2-1-2 bullish reversal pattern is forming in the Palantir Technologies stock on the H1 timeframe. As the full timeframe continuity is already bullish, we will also have to trade in a bullish direction on lower timeframes.
You can see clearly in the image below.
You should remember that a 2-1-2 bullish reversal is a complete strat pattern. However, we will open a trade once the price breaks the high of the scenario 1 candlestick.
I have been using the indicator, and it has automatically identified the 2-1-2 pattern on the chart. It’s very useful with the alert feature.
Open the trade
We always need three prices to open a trade: the stop loss price, the entry price, and the take profit price.
Trade entry
After confirmation of full-timeframe continuity and actionable pattern, open the buy trade once the price breaks the high of 1-candlestick. Then, a 2-1-2 pattern will be completed.
Find a safe stop loss level.
Next, find a safe and tight stop loss level. We will use tight stop loss to get a better risk-reward ratio. If we use a higher timeframe stop loss, then the risk-reward ratio will decrease. That’s why we always use the lower timeframe stoploss
In PLTR stock, I switched to the 15M timeframe to look for a safe stop loss level. You should also remember that we have found the actionable signal on the H1 timeframe. On the 15M timeframe, you can see a shooter candlestick, after which the market rises. So, I will use the low of the shooter candlestick as a stop-loss level.
Take profit level
The first step is to identify the history of the stock to identify the price target using the pivot machine gun pattern or TTO pattern. Next, you can use the price tracing method. For example, once a 2-2 Up pattern forms, move stop loss below the low of the 2U candlestick. Then, after the next 2U candlestick, move stoploss to the next low. You can use this tracing method on higher timeframes, and sometimes, this method provides ultra-high-risk reward trades.
The bottom line
The strat trading strategy is straightforward and a proven trading method. With the help of advanced tools, trading strat patterns has become much easier.
I hope explaining the PLTR stock trading example will increase your confidence in the strat patterns trading.
If you have any questions about the strat strategy, dont forget to comment below.
Thanks