I’ve got 5 or 6 “rules of thumb” that I keep in mind while day trading. One day I’ll put them all down in one article. But today we had a great example of the “flat top” rule of thumb, so I wanted to record a video of this morning’s activity to show it in action.
The rule goes like this. Market reversal points are usually spikes, with an extreme price print hit and moved away from rapidly. So if you see a market starting to top out and forming a “flat top” (where the price high is hit a number of times) the most likely scenario is that the market is going to spike through this flat top. Then you might see some stops run – as they’ve been placed above this congestion zone – and the market might be on its way to an exhaustion high.
The same rule applies at bottoms, but they’re less obvious because markets bottom more quickly and come with exhaustion selling and spiky down bars.
Good luck with your Emini trading.