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7 Questions to create the Perfect Trading Signal

7 Questions to create the Perfect Trading Signal

When Scanning and Searching for Signals Ask these 7 Questions: 

Question 1: Where is the Impulse Move? I am looking for 2-3 Trend Candles that break out of a trading range. It can also happen when there is an Established Trend. 

Question 2: Is there a good pullback? After an impulse move price takes 1-2-3 up to 5 candle pullback before it enters past 10 ema. The pullback candles are often smaller in range while the 10 and 20 lines are still separated and pointing up or down.  Best Single Leg pullbacks end near 10 while the best 2 legged Pullback ends near 20. I only take single-legged pullbacks. 

Question 3: Is the Impulse move too climactic? If Yes, No Trade. Price should not be too far from 10 ema. I don’t want signals when the Rubber Band Effect is present. 

Question 4: Is the Pullback Impulsive? If Yes, No Trade. The 10 ema should not point down. Sometimes the pullback candles are equally or more impulsive than the impulse candles. Or price goes back inside the trading range. No trade. 

Question 5: Is this the first or the second pullback? If yes, go ahead, if it’s late in the trend, perhaps think about avoiding it. 

Question 6: Is there an S/R Level near Entry Level? If yes, do not trade until that level is clear. The S/R level should be a Trading Range High or Low from the HTF. e.g. when trading H1/M5 H1 should be out of TR. For M5/M1 it should be either or both.

 Question 7: Is M5 Breakout Phase or Pulling Back? If it is showing TC then wait for a pullback on the m1. If the m5 chart is showing pullback, wait for at least the high of the m5 candle to be broken

Entry Types: 

  1. Break of Premarket Highs and Pullback Banana signal
  2. The first pullback after a breakout 
  3. The Micro Pullback Setup after a breakout TC

Picture of Jay C.
Jay C.