Trading "V" pattern for whopping 26% return in 1 month

Most of the reversals both Bullish Reversal or Bearish Reversals can be identified using candle stick chart patterns. The "V-bottom" is a V-shaped bottom and as the name suggests, it indicates sharp pullback after sudden price drop. After sudden price drop  if we observe candle formations like "Morning Star", "Morning Star Doji","Hammer" it could be an indication for a probable bullish reversal. But the confirmation for this pattern comes from the third candle which has to be a "Full-Bodied Green Candle" and more importantly, the low of the third candle must be above the low made by the previous Doji Candle.

Learn from Real Trade

 After sudden price drop from 179.7 to 117.85 in just two months (Oct-Nov), on 5th December 2016, I observed a Doji candle in the monthly chart of "Future Retail" / NSE. This Doji candle made a lower low at 115.45 (Doji candles show indecisiveness for investors, where investors are not sure whether the price will fall further or if the price fall will be arrested).

In the lower time frame chart (weekly/daily) when I observed some buying interest above 115.45, I entered into this trade at around 120 with a stop loss at 115 (0.45 points less than the previous low). That means even if stop loss was hit, the risk for this trade would have been 5 points.

Targets were 137, 145, 150+ levels as I was expecting some pullback to historical resistance levels. Planned reward was minimum 3 times the risk.

Reward:Risk = 3:1. For me, having reward:risk ratio more than 2:1 is an important criteria for trade selection or to enter any trade.

But confirmation for this trade came when next month (Jan 2017) it opened at 129.5 and headed higher. Some pullback was inevitable, and the result is just in-front of us.Today I closed the trade with more than 26 % positive returns in less than 30 trading sessions.

Happy Learning. Learn and Earn.