Introduction: Learn the Art of Swing Trading #6

Tip #6. Learn the 50% rule

How can you tell if a candle is significant? Easy. Look to see how far it has moved into the prior days range. If it moves at least 50% into the prior days range, then it is significant. And, it is especially significant if it closes at least 50% into the prior days range. This usually shows up on the stock chart as a piercing candlestick pattern or an engulfing candlestick pattern.

Here is an example:

All of the important reversals in this stock happened only after a candle moved at least 50% into the prior days range (some moved much more than 50%).

This concept is so powerful that I am suspicious of buying any pullback unless it moves at least 50% into the prior days range.