p2 and p3 setup in secondary trend
Trend trading has always been one of the most popular trading methods. Successful traders always try to understand the trend and the direction of the market movement and enter into a transaction along with others in the same direction because they know that entering into a transaction against the trend often does not lead to a favorable result.
Trend trading has always been one of the most popular trading methods.
Before transaction with trading setups, we should note one thing. We suggest you to use two different time frames to analyze and enter into the transaction. A long time frame like daily to analyze the main trend (Primary Trend) and a shorter time frame like one hour to check and enter the trade (Secondary Trend).
In this article, we are going to examine the secondary trend setups and talk about how to understand the market rotation in the main trend from the second trend. We will also examine entry points in the secondary trend and how to minimize losses.
For example, a daily candle contains 24 one-hour candles. So in the heart of a daily candle, we may have an hourly trend. So it can be said that there are several hourly trends in a daily trend.
We use numbers as follows to determine trends: number 1 is the beginning of the step, number 2 is the end of the step and the beginning of correction, and number 3 is the end of the correction (P1, P2, P3 are also used for naming)
In the image below, you can see a bearish trend in the S&P500 in the daily time frame (Primary Trend).
As the picture shows, we are in a daily downtrend. Now we want to see the last moving step that has been determined in the one-hour time frame (Secondary Trend) and check the trading setups in it.
As you can see, in this bearish step in the daily time frame, we have several bearish 3 2 1 in one hour.
Now that we are familiar with the concept of trend and how to name it, we will examine trading setups (P2 and P3 setups).
Enter the trade if P3 fails
In this setup, when P3 is broken and the price returns to it, we can enter the trade. The stop loss is placed behind P2.
Enter the trade if P2 fails In this setup, we wait for the price to cross the new P2. Then we enter with the Stop command. The stop loss is placed behind P3
Keep in mind that you are in a downward trend in the daily time frame and your one-hour uptrend is just a correction in the daily time frame. The price can go up to 50% of the movement in the main time frame and enter the downward trend again. Daily P2 (Primary Trend) can also be an important point for price reversal. The price can go up to this point and then enter the downward trend again.