In this article, you will learn how to instantly identify a stair-step pattern. But that is not all,
You will also learn strategies you can use to make money on the stair-step pattern.
In fact, throughout this website, we have been emphasizing the avoidance of out-of-blue trading.
This is where you just wake up and hit the buy or the sell button, cross your fingers, and pray to the trading gods to have mercy on you.
You may land wins here and there. But losses will be in tons. Why?
Because this type of trading is not sustainable. And unless you are into trading just for the sake of it, you need a surefire way to double, heck, quadruple your invested money.
Fortunately, there are no secrets when it comes to trading on Olymp Trade.
In fact, the borderline between a newbie and a pro is so thin. Wait, before you shout at me, let me explain.
A newbie looks at the chart and thinks, huh, this looks like it’s going up. Then he hits buy. Then boom! He earns a profit.
A pro, on the other hand, looks at the same chart, picks a few technical tools, and he confirms it is an uptrend and trades.
Truth is the newbie will continue winning as long as luck is on his side; the pro though; has more than infinite chances of winning. And guess what, how winning will not be contingent on the colors of the rainbow.
Hehe… Figure that out.
What is the stair-step pattern on Olymp Trade?
The stair steps is a trading pattern that develops along a trend.
When experiencing a downtrend, prices will experience sharp drops followed by reciprocating price adjustments. The result is a pattern that looks like the image shown below. A stairs steps.
That is what the stair-step pattern looks like in a downtrend market.
It is formed when the price fall and rises abruptly, forming what looks like stairs. And that is how this pattern earned its name.
During an uptrend, you often notice long bullish candles forming as the price moves up. Then the price falls, and the circle starts again.
These points where the price swings back (correction) create brand new resistance levels which act as resistance levels for a short period before new ones are formed as the trend continues upwards.
Additionally, support levels are formed along the trend line.
Why do you need a trendline when trading the stock stair step pattern?
Well, you could wink it and guess this stair-step pattern or introduce a trend line into the mix and instantly gather more information.
As the new support and resistance levels are formed, it gives a hint on when and where the break-out might occur.
How to open profitable trade positions using a stair-step pattern on Olymp Trade
a). Where to enter a long buy position on a stock stair step pattern
You should consider opening a long buy position as soon as you see the price touch the trend line and the support level. This is because it will reverse and continue with the uptrend.
You may notice that after the trend completely changes direction, prices, as they go down, will be reversing around the resistance levels of the previous uptrend.
As such, these areas may serve as prime areas to open short-lasting buy positions.
You just have to wait for the downtrend price action to touch the trendline, giving you new support levels.
b). Where to put the sell position on a stock stair step pattern
Your sell positions should be placed around the previous resistance levels during an uptrend.
As we have mentioned, prices tend to reverse around these areas during a downtrend.
And depending on the chart timeframe, you can enter a short sell position lasting up to a minute.
You’ve learned how to trade the stock stair step pattern, now what next?
Stairstep patterns need not be used alone. You will need a trend line along with support and resistance levels.
Based on what you have learned here, consider trying it out on your demo account.