Day One. This little formation is interesting. What do you see? What I see is strong support—a triple bottom, which we learned about earlier. This is really strong support. The 50% level of the last minor move, as shown on the chart, is really close—too close to place an order above the high of the last day here, because our reward/risk ratio would not be very good. I want you to think about this: How could we enter long?

Here’s how. Remember when we talked about entering a trending market in an earlier lesson? Why don’t we do the same thing here? Take the average closing price over the last four days and enter the market tomorrow at that price. This is just a different slant on what you learned earlier.

For whatever reason, we just want to “scalp” the market and try and pick up a quick $200 or so, after commissions. Do you see an area that we could use for a target? Right, the 50% level of the last minor move again. I’m so proud of you because I know you knew the answer to that one before I told you!

Let’s play the chart forward and see what happens next. Now, remember, if our target is hit, we have an exit order already placed to get out with a profit, so an exit will happen automatically. Also, we have a very tight stop on this trade and I feel good about it because the stop is just under the triple bottom support area. Let’s look!

As you can see, our plan worked out just fine. Also, notice how well it worked to get into the market at a good fill price using the four-day average. I used the average of the last four days' closing price rather than the last four days' lows since it was not a trending market and was at the bottom of major support. This example is just another way to use the average price to enter a market. We also had our exit order in place at the same time we entered the market and exited with our expected profit of just over $200 after commissions. This is a great way to build a small account.