Are you a trader with a small capital and looking to capitalize on the first green day pattern? Or, are you just enticed by the first green day pattern and want to know all about it? Whatever it is, you are on the right platform. We are going to share with you what this pattern is and how to trade it.
The first green day pattern is one of the favorite patterns among traders. If all things go as expected, the pattern brings huge returns on your investment. Additionally, the pattern is pretty easy to identify and trade. It is even more easy to understand if you already know about breakout and breakout trading strategies. It involves just a different way of looking at financial assets breaking out.
What is the first green day pattern?
The first green day pattern is based on, as the name suggests, the first green day. Whereas, the first green day means the formation of a green candlestick on the daily price charts. It means the opening price of the financial asset was less than the closing price. A green candlestick also demonstrates that the price continued to rise throughout the day. Now, what is the first green day pattern? Let’s try to understand in the simplest words.
Suppose you have a daily chart in front of you and you are seeing a lot of red candles on the chart. It means there is a long and very strong downtrend. Or, you see that nothing significant is happening and the market is just going sideways.
All of a sudden, volume begins to rise dramatically. There might be positive news or whatever the reason. As a result of that much volume, a green candlestick appears on the chart after a long downtrend or sideways action. This is the first green day pattern – the formation of a green candlestick, with higher than usual volume, after a strong downtrend or sideways trend.
How to trade the first green day pattern?
As we already know, a first green day pattern forms when a green candlestick appears on a daily chart. But the question is how can someone know, or even predict when to buy intraday? And how can someone forecast whether the stock will close strong or not? These are important questions to consider and here comes your first green day strategy into the picture. It depends on you how you want to take advantage of it. You can decide whether to buy intraday or hold overnight. Let’s try to understand it.
The first option is to make quick trades and make as much profit as you can. The reason is you don’t know, and can’t even possibly know, what price will do throughout the day. Therefore, it is a great idea to take profit and get out of the trade.
The second option is to look for pullbacks or dips and enter the trade. You will find dips in spiking assets. It enables you to buy low and sell high. You can hold overnight if you think the potential is higher.
Still don’t know what to do? Consider the following entries on a first green day.
Dip buys is a first green day pattern strategy that involves buying dips. This strategy requires you to look for the price to retest intraday highs or make new highs after breaking out. That means you buy dips instead of chasing spiking. However, you also need to keep in mind that sometimes assets don’t offer you a dip to enter. That’s because of good news and high volume that never allows price retrace.
The second viable first green day pattern strategy is the high-of-day breakout strategy. It is a useful strategy in case of missing out on dips or when prices don’t offer you a dip to enter. This strategy involves looking for prices to break out of the previous high of the day. If it happens, you can enter the trade and choose between selling into the upcoming spike or holding for overnight.
The third first green day pattern strategy is the gap-up strategy. It becomes a great option when the price of an asset keeps increasing throughout the day. When you see that the price will close near its high, it is time to enter. That means you will hold your position overnight and sell when a gap-up appears the next day. How do you know the gap up will appear? It will appear because piling up orders in the morning creates a gap far more than often. However, it is important to be cautious and sell as soon as prices meet your profit margin requirements.
Big percent gainers strategy
The fourth first green day pattern strategy is to watch out for big percent gainers. What does that mean? That means financial assets with huge potential. This strategy involves looking out for the first green day with an enormous morning spike. Now, it is time to wait for the uptrend to hang around for the entire day.
When an asset maintains an uptrend for the whole day, it indicates the asset is up for a multi-day green run. In other words, this first day’s green candle won’t be the last. If the trend begins to lose strength in the evening, it means there is no guarantee. If it doesn’t, it means the high interest of buyers is still out there and the chances of a multi-day green run are high.
Moreover, minutely observing evening patterns also help you avoid FOMO. How so? Because you will have confidence in what you are after. Unlike traders who get caught by the FOMO and begin to take profits. When it happens, prices begin to drop but you’ll have the confidence to stick to your plan. Now is the time to take action, enter the trade when the price pulls back.
A first green day setup examples
The following are a few examples of a perfect first green day setup that brought substantial gains for traders.
- Ignite International Brands Ltd – back in September 2019, Dan Bilzerian posted on his Instagram story about the listing of his company on the US stock exchange. The news caused the formation of a perfect first green day pattern. The stock of Ignite International Brands Ltd also spiked the next morning. Traders made substantial profits by holding overnight as well as using dip buy strategy.
- NanoMobile Healthcare Inc – Back in October 2021, NanoMobile Healthcare Inc stock also formed a perfect first green day pattern. The price gapped up the next day and the volume was also significantly higher. Traders made huge gains by using a gap-up strategy.
Some useful tips for trading the first green day
Trading a first green day pattern turns out to be highly profitable and it happens far more than often. However, it is also a risky one because you never know what may happen. However, the following tips are going to help you be on the winning side.
- It is always a good idea to risk only a part of your capital. Because you cannot possibly predict what may happen in the market. The news may turn out to be true and the stock may rise beyond your imagination. Conversely, if the news turns out to be incorrect, you know what may happen then. Therefore, it is important to risk a portion of your portfolio. For example, you can risk a quarter or third of your capital.
- Try to avoid hot sectors when looking for trading a first green day pattern. For example, cryptocurrencies and cloud computing sectors spike but often fail. That said, careful selection of sectors is key to profitability in trading this pattern.
- You need to understand that volume is the key in trading a first green day pattern. If there aren’t enough buyers, prices don’t spike. It is as simple as that. So, never underestimate the power and importance of volume. Otherwise, you may find yourself at the wrong end of the trend.
- In addition to volume, consider all possible factors. For example, you can look at float as well as volume. It gives you a better idea about what is likely.
A first green day pattern forms after a very strong downtrend or sideways price action of an asset. It is easy to identify the pattern because everyone knows what a green candlestick means. However, trading a first green day pattern requires you to make quick and smart decisions. There are certain strategies you can use to make a significant profit.
All of the strategies discussed earlier are proven strategies. However, we are not advising here to trade these strategies. These are just for guidance. You should do your own research and analyze what is best for your trading endeavor.