Here is a strategy that works both long and short with cheap or higher priced stocks.
It utilizes observation instead of thinking so if you are just starting out or are having problems it is an easy program to follow.
There are no chart patterns to memorize or think you are seeing, there are no fancy named indicators to decipher.
Ok, lets start with the rules:
- Entry - The underlining-operating premise is trading stocks that are hitting new highs or new lows. That is the only qualifying action that you will follow in order to put on a trade.
- Set your stop at the previous candles high/low or .10 whichever is higher/lower +/_ .01.
- Exit – (A) When it stops moving in the direction it was going, you exit the trade.
(B) When it makes a big move in the direction it was going you get out.
(C) If it continue trending, you get out before the end of the day.
4. Start one hour after the open and trade only the next hour and a half and the last 2 hours of the trading day. Set an alarm clock to remind you if you need to.
5. Trade only small spread, .01-.02, high volume 800,000 + share stocks using market orders.
To start with, the less you massage the rules and think about freelancing the better of you’ll be. In time, simple tweaks and more indepth observation will yield even better results but for now if you implement this simple plan you’ll gain:
1.An immediate appreciation of probabilities
2. You’ll get used to taking profits
3. You’ll gain a lot of confidence that the markets can pay you for your time and are not fundamentally difficult to learn.
Putting it into action.
Put on some relaxing music.
First you’ll need to have a real time hitting new highs and lows indicator. It’s not possible to do without this.
Use only a 5 minute, 1 day chart.
Eliminate all other indicators and lines from your 5 minute chart. You want it naked.
Watch the news highs/lows indicator like a hawk
When you see a stock making the new high or low, check out the daily volume and the spread. If they are in line with what you are looking for, put on the trade.
Do not think about winning or losing, just do it.
Follow the plan.
Lets check the following 5 examples from today(TUESDAY, MARCH 30, 2010 ). After I put them on the screen and asked her, my 4 1/2 year old daughter identified these movers. “Look daddy, this one is green at the top(or red on the bottom)
All of these trades happened to work out but that is not so much the point although trading this way you will find the % of winners is quite high.
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7 comments:
Elegant - thanks for sharing!
Thank you so much for your great support.I am wondering what brokerage are you using?AS living in toronto-CANADA,it's hard to find broker that is offering 1-2 point spread.
Thank you
Kom - I use Jitney.I don't know what you mean by a 1-2 point spread, I'm talking about trading stocks with a 1-2 cent spread and the broker doesn't offer them it's just the way the stock trades.
Thanks for shearing!
But where are the "5 examples
from today" you wrote about?...I'm new to your blog.Did you mean chart examples? Where can I see them?...
i tried it out the past couple days. unfortunately, i logged onto my platform too late both times to get the good entry/exit charts that i usually post. of course, i wasn't able to catch every stock making high/lows. i think i tried it on 3 or 4 stock that i thought were setting up well into the breaking high. i know that that discretion will also skew my results.
i took some winners and some losers. of course, the winners are never as big as they should be, but that is my fault and my fears. i am thinking about incorporating a trailing stop, that way i don't watch, just let the stock ride. i think the greatest asset to the program is keeping you in the momentum flow.
you and i both have the H/L ticker that shows us how many times the stock has hit highs that day. if hit hit the ticker 180 times, that is a 1.80 trade. there is no reason why i shouldn't be able to buy that stock after the 60th high, or 70th high,or whatever. the trick is setting the correct stop.
MO- The 5 stocks are the charts posted directly below this post.
J- Wen the markets were crashing in fall 2008 I saw some new lows hittings in the #1000s.
"The Finger" is just to show that a trading edge can be the simplest one out there. With it I don't need to know anything at all besides "is it hitting new highs or lows". If it is,trade it. Then look to do the same thing over and over and over again.
The charts are displayed on the day this post was made TUESDAY, MARCH 30, 2010, you have to look it up in the blog archives.
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