The market loves to catch people by surprise. Never forget that statement. I use the smash day pattern to enter the market, taking advantage of what looks like a strong market move. The underlying truth of this trading pattern is that the day after the patterns appear, prices do exactly the opposite of what “the crowd” is expecting. In other words, smash day represents a failure of what should have happened.

Smash day pattern for a buy

The pattern to look for is a day with a higher high, higher low, and higher close. But, the close is substantially below the open. Such a day can cover up the lows of the previous few days. Taking out this day’s high is very bullish. If the next day the price renews the high of the smash day in the end, you can open a buy position with a stop loss below the low of the smash day.

Smash day pattern for a sell

smash day trading pattern

The sell is just the opposite, a down close substantially above the open, with a sell tomorrow at that day’s low. For example, if the day closes at the top of the trading range above the previous high. The next day, the price goes down. After the minimum of the smash day is renewed, we can open a sell position, with a stop loss above the high.

In conclusion

Certainly, successful trading requires attention to psychology and risk management. Nowadays the volatility is very high and the market can reverse anytime. So, a trader has to keep an eye on reversal signals. Smash day has very high accuracy. However, protective orders must always be used.

Smash day trading pattern. Explained by Inna Rosputnia

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