The majority of traders lose money over time, and not because they lack direction, but rather because they fall victim to illusory trades. A stock pokes above resistance, volume looks flashy, and the next second… the trader’s SL gets triggered.
So, how should one avoid that? Here’s the simple framework that could help build a trade setup with much higher conviction:
Start with the Bigger Picture (15–30 min chart)
Never begin on a 5-min chart. First, you want to know: what’s the trend of the day?
Is the stock above its VWAP and key EMAs?
Is it making higher highs/lows?
If yes ? bullish bias. If not ? no longs. This step keeps aligned with the real money flow, not random noise.
Drop to 5-Min Chart for Execution
Once the higher timeframe gives the bias, zoom in for entries. Here one should watch for:
Pullback towards VWAP/EMA zones.
Momentum checks (RSI cooling off but not oversold, MACD still in favor).
It’s like waiting for the wind to blow in your direction before you set sail.
Let Price Action Speak
Indicators guide us, but the candle tells the truth.
A bullish engulfing near VWAP in an uptrend, or a rejection wick at resistance in a downtrend, signals strength.
Doji or low-conviction candles, on the other hand, are best avoided.
Validate with Volume
No volume = no trade. A breakout or reversal only counts if buyers/sellers show up in force.
Structure the Trade
Entry: above/below the confirmation candle.
Stop-loss: just beyond the invalidation level (usually VWAP or swing low/high).
Target: Keep it optimal with respect to risk and the technical levels.
The Point
It’s not magic, and it’s not about chasing “90% accuracy” claims that build false hopes. Real clarity comes from stacking the right tools and identifying trends, like VWAP, indicators, candlesticks, and volume. Put together, they could give you a better picture. Instead of running after every breakout, you should focus only on the trades with real conviction.
Disclaimer:
This blog is purely for educational purposes and should not be considered investment advice. Please do your own research or consult a registered financial advisor before making any investment decisions.