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1.) If the stochastic crosses over the 20 band consider this a possible buy
signal, and if it crosses below 80, then it would be a sell signal.
2.) Use several charts in different time periods for each stock you are trading.
60, 13, 8, 3, and 1 minute charts will enable you to see the bigger picture. If
the 60, 13, and 8 minute charts are in an uptrend, look at the 3 / 1 minute charts
for an entry into the trend, such as when the lead stochastic moves up from the
20 band. Don't fight the trend of the longer time frames, but if your trade is going
against the major trend, be aware that you won't want to stay in it for too long.
3.) If you are new to stock trading, start with low lots of shares such as 50, and
avoid jumping in with orders for 500+. A trade with 70 shares going against you
is psychologically easier to take than one with 500.
4.) Be ware of making trades during a consolidation, which can be indicated by flat
or nearly flat 5 and 15 period moving averages. It is best to make trades when the
stock is in a trend identified by higher highers and higher lows for an uptrend,
or lower highs and lower lows for a downtrend. A strong trend should show a wide
channel between the 5 and 15 period moving averages. If the price is consolidated
into a tight range for the past several bars, be aware that a breakout may be triggered
when the price moves above or below the highest/lowest values. You can either enter a trade at the breakout price as it happens, or wait for the first wave to complete
and the price to pull back close to the original breakout price.
5.) Know where your exit points in the trade will be, including your stop loss value.
It is important to take losses and not let a losing trade run away while you hope
it will turn in your favour later on.. it might not.
6.) If the futures are in an uptrend, but your stock is moving down this could signal
a possible explosive move down when the futures start to go back down again. The
same applies in reverse for moves up.
8.) Look at the previous days trading range by subtracting the high of the day from
the low of the day. You may want to add this into a stock scanning program so you
can find stocks which had a range of $3+ for example. Stocks with large ranges will
give more opportunities for larger moves for you to capture compared to stocks which
only fluctuate by a few cents each day.
9.) Watch out for stocks that have a significant gap at the open, either up or down.
Stocks that have gapped are likely to have good volume and swings in price, presenting
good trading opportunities. A gap is defined by the opening of the bar being greater
or less than the close of the previous bar. If a stock closed at $65 yesterday and
opened at $69 today, then it has gapped up by $4.
10.) The Asian and European markets can be used as a possible guide to get an idea
of which direction the US market is likely to go in. For example, if the xyz is
down 3%, the abc is down 2.3% then there is a strong possibility the US Futures
and stocks will end up down overall. The US futures will have been trading down
in their overnight session with Asia/Europe as well, so there could be an immediate
rally at the 8am open before moving down further |
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