Massive Signals for January Effect Strategy

Why use a 5-minute chart? John Paul from DayTradeToWin.com believes it provides a great picture of all market activity. You can see the same patterns as a 15-minute or larger time frame. And it’s not small enough where you’re driving yourself crazy looking for a trade every second.

Really, it’s the best of both worlds. Sometimes, you’ll want to use a daily chart. If you’re comparing overall activity for the current month or year, then a daily chart is recommended. This time frame is especially useful with the January Effect trading strategy.

Recall from previous posts that the January Effect exists when January closes higher than it opened. You can check for its existence in early February, the earliest. If price did closer higher, then the rules say to expect the same year to close higher in December. John Paul believes in the accuracy of this strategy, citing historical trends. Unlike other trading methods, you will not be able to draw a static line of support and resistence.

Finding an entry involves looking for a retracement. Remember how the market is expected to go up? Well, when it falls, you’re looking to get in when it climbs back up (or retraces) 50% of the way.

Watch the video to see how to filter trades and handle these troublesome summer conditions. John Paul also believes the markets work in cycles. If you’re encountring periods of unusually low volatility, don’t be suprised when it picks up. Trending days may be the best for trading, but they’re not all that common. A grouping of days, about five in a row, may constitute a “group.” John Paul has a specific way to trade them.

Markets like to test where they’ve already been. He says it’s better to go short when testing previous lows or long when testing previous highs. If you continue with the cycle, you can get shopped up with the back and forth activity.

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