Here’s what to look for if you want to score the big profits in the stock market on a regular basis:
I bought Advance Paradigm on March, 1999 at $55.125 based on four bullish conditions.
- ADVP was going up (. see the big picture). We knew the stock was going up because Advance Paradigm was making higher highs and higher lows. We like to buy stocks that are going up and sell stocks that are going down.
- ADVP found support at $53.500 the day before. The low on March 29th was the same as the low on March 24th. Buyers showed enough interest at that price to prevent the stock from going lower. The March 24th and 29th low presented an ideal place for a protective sell stop should ADVP not act as expected.
- The March 29th price bar was a reversal bar. The stock made a new low, but closed up for the day and closed greater than the open.
- Once ADVP traded above the previous day’s high, we bought 300 shares using a stop limit order at $55.125.
After buying ADVP, I immediately placed a sell stop order, Good-Till-Cancel, with no limit, at $53.375, just below the previous day’s low.
I always place a protective stop order in case I am wrong.
Once ADVP traded up to a price where our open profits equaled the initial risk, I sold 100 shares at $57.125 and moved the protective sell stop on the remaining shares to breakeven.
The following day, ADVP gaps up on the open to $65.750, trades up to a high of $67.750, then starts to trade down. Once ADVP trades below the gap open, I sell another 100 shares at $64.375.
At the end of the trading day, it is apparent that ADVP will close down relative to the open. I sell the remaining 100 shares at $63.625.
After two days, I have made $2037 on a trade that had a total risk of only $525 for a total return of 12.3%.
This is just an example of the type of trades I do: well defined risk, clearly spelled out entry criteria, profit objectives, and stop placement adjustments.
Our trading style is designed to enter into stocks that have been identified, using a confluence on indicators, as being in a low risk, high probability of success position.
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