Importance of Trend Confirmation
November 13, 2012 10:46 AM

Market wisdom constantly teaches us “TREND IS FRIEND” and never ignore or counter-trend. Most traders look for trend indications to ride the trend wave.
In Pattern trading, it is most important to trade patterns with the trend for any trading success.

My primary trading methodology is to trade few Geometric patterns (ABCs, Gartleys, DB/DTs, Dragons, H&S/Inv. HS, Breakouts/Breakdowns in the direction of trend with Market Context. One of the aspect of my trading is to wait for TREND confirmation before entering into any pattern trade. Patience and disciplinepays off big if you wait for Trend confirmations before entering into a trade.

On Nov. 12th, 2012, S&P E-minis presented a case for clear trend confirmation into ABC Pattern setups.

Around 10am, I started watching a great ABC Bullish Pattern Setup with Entry Level above 1378 with a STOP at 1376. I patiently waited for it to trigger (Close above EL).
To my surprise, SuperBARS (Trend based Paintbars) is showing continuation of bearish trend even above EL. This tells me that down leg (BC) in ABC Pattern is NOT complete.
I hesitated a bit and removed my bid to buy. ES tried to break above 200-SMA and started drifting lower below 200-SMA with Bearish SuperBar Trend. Once
price closed below ABC Entry (1378), I knew Superbars did indicate further correction into ABC leg and may be forming a potential Double Bottom setup.

I waited patiently for another 90 minutes for ES to complete its Double Bottom setup (still in ABC with C at 94%). Around 11.30am I started seeing GREEN SuperBars
signaling a potential reversal and completion of Double Bottom and ABC Bullish Trade setup.

I entered a Long trade into ABC pattern at 1374.5 with a Stop at 1372.5 (below C). Targets were placed at 1374.5 (+2), 1376.5 (+4) and 1378 (+5.5). Stop was set at -2 points.

Within 90 minutes of time all my targets were hit. Patience and Discipline does pay off and have a great merit in trading.

TRADE Chart

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