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Up to two years ago I always used options to execute such trades but with the brilliant development of state of the
art trading platforms I not use spread betting instruments. Spread betting has the added advantage that profits are tax
free. I have opted for the IG Markets platform, but there are many other excellent platform providers to choose from.
Normally I place a 10 Euro bet on the Wall Street DFB (Daily Funded Bet). This is the financial instrument IG
Markets uses to track the Dow Jones Industrial Average. This means that for every point move in the index I will
win or lose 10 Euro. If I reckon the trend is going to go up I BUY the DFB. If the trend is expected to go down I
SELL the DFB. I normally use a 200 point sell stop, which means my maximum loss on the trade will be 2,000
Euro.
Depending on the announcement (the market may take a day or two to filter the news) I close the loosing position
or let it stop out. I stick with the winning trade until I see a technical breakdown happening. This allows me stay
with the momentum trend, which regularly follows such events, as long as possible. (Trading rule 3: Cut your
losses early, let your winners run).
A. Flag Formation.
The flag pattern forms what looks like a rectangle. The rectangle is formed by two parallel trend lines that act as
support and resistance for the price until the price breaks out. In general, the flag will not be perfectly flat but will
have its trend lines sloping.
B. Pennant Formation.
The pennant forms what looks like a symmetrical triangle, where the support and resistance trend lines converge
towards each other.
5. Channel/Range Trade.
In the context of technical analysis, a channel is defined as the area between two parallel lines and is often taken as a
measure of a trading range. The upper trend line connects price peaks (highs) or closes, and the lower trend line
connects lows or closes.
A. Formation: Hammer.
The hammer pattern normally appears when a short term down trend is about to change. The longer the length of the
taper the better.
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