The All-American TraderQ: So MACD is your momentum indicator, if you start to see
divergence that’s going to be your clue to a turn in the price action?
A: Exactly.
Q: Do you wait for a red candlestick to develop before you
initiate a short?
A: Yes. I not only do that, but I don’t try to pick exact tops and
I don’t try to pick exact bottoms. I don’t really care if the thing is
trading at 770 at the top and I get short only at 765 because I know
it’s going to 762. I’ve gotten burned way too many times trying to
pick tops and bottoms. I’d rather know where it’s going. All I care
about is where it’s going.
Q: What gives you confidence in knowing where it’s going?
A: The candles, the volume.
Q: In candles what you are looking for?
A: I’m looking for a medium-size candle with a small wick on
both sides. Those are golden.
Q: Okay.
A: I’m looking for the big fight, like just a small wick on top and
bottom. Then I will get inside that candle, inside that fight and I
will put my orders inside that candle and usually put my stop three
to five ticks above the body of the candle.
Q: So not even above the top of the candle?
A: No. No the true fight, where the fighting is going on that’s the
body. Not the wicks, the wicks are worthless.