Bottom Shadows Theory

Introduction

The Bottom Shadows Trading System identifies reversal points where stocks drop below the previous candle's low and then make a sudden upward reversal. This system is suitable for both daily and weekly charts, providing traders with reliable entry and exit points.

How It Works

Setup

A BOTTOM SHADOW, pointing downwards, occurs when a stock falls below the low of the previous candle and then makes a sudden reversal upwards. The fall below the low of the previous candle results in a shadow. The closing price is above the low of the previous candle.

Entry

Buy at the day's high (LONG) / Sell at the day's low (SHORT)

Permanent Filters

• 50 % + X must tend in one direction
• Intermarket spread DJIA: Weekly basis
• 20-day average weekly basis
• Triple bar trend-following filter weekly basis

Volatility Filter

0.5 % - 2.5 % daily basis

Stops

• Initial stop for LONG position is the current candle's low.
• Initial stop for SHORT position is the current candle's high.
• Trailing stop: After each day's candle, the stop is moved by the amount of the book profit.
• Time stop: 5 candles if no stop is reached.

Position Size

1 % of the account volume: Point distance of the initial stop = number of shares

Profit Target

2 R profit target for half of the position

Loss Brake

After 2 consecutive losses, the system is blocked for the applied timeframe. The same block applies to the traded base value.

System Highlights

• Advanced AI algorithms designed to spot market trends.
• Real-time analysis to make quick and informed decisions.
• Customizable options for individual trading preferences.

Optimizing Your Strategies

Discover techniques to maximize your trading success with our detailed guide on using the Bottom Shadows System effectively.

Download Full Guide

Join Our Community

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Conclusion

The Bottom Shadows Trading System is more than a set of rules; it is a comprehensive trading framework that integrates technical analysis, psychology, and rigorous risk management. It equips traders with the knowledge and tools necessary to navigate the complexities of the market, maximizing opportunities while controlling risk. By applying this system, traders of all experience levels can enhance their market presence, making informed and profitable trading decisions.