Reversing market trade entry checklist
USE THIS TRADE SETUP ONLY IF THE MARKET WAS TRENDING, AND NOW IT DISPLAYED THE HEADWIND POSSIBLE REVERSAL SIGNAL
Headwind is a trend reversal trade. As a stock makes goes higher and higher (or, lower and lower); eventually, it may display a Headwind signal that indicates a reversal of trend may be imminent. Headwind setup uses this signal as a vital component of the checklist conditions.
If Headwind signal appears when the stock is going straight up or down without discernible swings, i.e., without distinct higher high higher low (or lower high lower low), then the Headwind signal is best avoided.
As Headwind trade is against the prevailing trend, it is possible that the weekly chart Backdrop color would take a few days more to turn in favor trade’s direction. One may enter a trade even without weekly Backdrop color aligned with the trade direction provided the weekly candle shape is firmly in favor of the intended trade direction.
Headwind signal may or may not change the current trend of the stock. It is therefore advisable to take partial profit (or full profit if one so desires) at the Value Area. And leave the remaining position with breakeven or trailing stop. One may also book partial profit as soon as profit equals risk (i.e., initial stop loss) amount.
Trade entry is to be taken only if potential reward (distance between the entry price and initial profit target) is at least as much as the potential risk (gap between the entry price and initial stop loss).
USE THE CUE HOP ON (TRENDING) TEMPLATE FOR THE DAILY CHECKLIST AND THE CUE BACKDROP TEMPLATE FOR THE WEEKLY CHECKLIST
Daily Headwind color
Daily Flow candle color
Daily candle shape
Daily Relative Performance
Daily Reward Risk Ratio
Weekly Backdrop candle
Cyan or green
Cyan or green or yellow
Hollow or with long lower tail
At least one or more
Color is cyan or shape is hollow or with long lower tail
Magenta or red
Magenta or red or yellow
Solid or with long upper tail
At least one or more
Color is magenta or shape is bearish- solid or with long upper tail