Many know the power of the breakout in the stock market, but usually these techniques generate more losses than gains. Why?
Because you tend to buy or sell without worrying about understanding the scenario. Before you buy or sell on the stock market, you have to analyze the trend and then look for an entry point. If you buy a stock market when the market is strongly bearish, at 90% the market will continue to fall, except in rare cases. There are techniques that allow you to identify the stock market trend reversals, but the best results are achieved if you follow the primary trend.
How to identify the primary trend and look for an entry point in Stock Market?
There are several techniques, but the one that I propose today is really simple and effective.
I’m talking about the expansion breakout of Jeff Cooper, the technique is very easy, find in the stock market like Nasdaq a stock with 2 mounth calendar high. The candle’s range must be equal or larger the largest day range of previous nine trading days. The after day and ONLY after day, you buy 1/8 point above today’s high. The stop loss is under the yesterday’s close of 1 point. For the short is the same rules in opposite direction, you need look a stock with 2 mounth calendar low, the candle’s range must be equal or larger the largest day range of previous nine trading days, after day you sell 1/8 point below today’s low. The stop loss is over the yesterday’s close of 1 point. Jeff Cooper said that the stop loss is under yesterday’s close of 1 point, i suggest 5 point.
The strength of this technique is to identify the primary trend, by scanning the highs and lows of the stock market and then look for an entry point with a pattern.
Here an example:
The entry point is at 2.59, 1 point above the yesterday’s high and the stop loss is at 2.49. You must follow the uptrend with trailing stop, you must enter the stop loss below the low of the day of the first candle, and go on like this until your stop loss is not hit.
If you have questions, you can write in the comments, thanks.