Algorithmic Trading Tips 04.

HIGHLY EFFICIENT SHORT PATTERN.

HOW TO IDENTIFY AND PROFIT WELL FROM A SHORT TRADE.

Sometimes life can seem so easy. The market is rallying up and the close is well above yesterday’s high. Everyone is bullish and only a few traders think about a reversal of the trend. This is your chance to get ahead of the crowd. Just use the simple chart pattern we call ‘Highly Efficient Shorting’.

Look at the simple pattern I marked on the chart. The white candles are those bullish days when everything seems to be all right. But I do not want to give you another „just follow the herd“ trading tip, this one is for the fast traders.

FIG. 1: SHORT-SIGNALS IN THE S&P 500 DAILY-CHART.

The definition of this pattern is quite simple. If today’s close is above today’s open and yesterdays high the pattern is fully defined. Be prepared that the party might be over soon and use the low of this high-close-day to get into a short position.

The chart above shows you some examples on the Standard & Poor’s 500 chart. Every time the Market touched the low of the HighCloseDay (orange line) you were able to make some nice profits on the short side (orange arrows).

{ High Close Days Pattern }

// The frist line defines that the pattern is displayed on the chart, not as sub-chart (like RSI)

Meta: subchart(false);

// If todays close is above than yesterdays high and it is a bullish day then draw a candlestick

if close > high[1] and close > open then drawcandlestick(open,high,low,close);

// Hint: right-click on any blue word to open Equilla help

This indicator was written with the Tradesignal traders’ language “Equilla”. Above you see how it is done. Can you reverse the pattern to display the LowCloseDays to enter a long position?