Tuesday, 12 October 2010

Knowing when to 'breakup' with your stock

  1. Short-term traders would use MACD as a guide for change in trend direction. Buy signals when the MACD crosses above signal line, sell signals when MACD crosses below signal line.
  2. Using stoch indicator, sell when stoch goes above 80 indicating an overbought condition
  3. Spotting price gap that is significantly lower accompanied by high trading volume (spelling trouble ahead)
  4. Setting a target price for minimizing loses can be done with a few methods using stock charts:
  • Simply setting a stop loss at 10% loss from current price or adopt the trailing stop-loss strategy as your stock price goes up
  • Exit if the stock price falls back below the resistance level after breaking through resistance - which gives smaller financial risk but prone to whipsaws (getting out of a potentially winning trade too soon)
  • Exit if the price falls below the mid-point of the trading range - gives a higher risk but less prone to whipsaws

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...