It’s September 12, 2013 and today I’d like to talk about creating your own trading strategy, and it’s very important you understand this and I want to discuss this more so because people message me from time to time and they want to know when to get in, when to get out of stocks.
You really have to start looking for your own trading strategy and what your trade is going to be. Without that you’re just going to be guessing and hoping based on what I do.
I want to show you a little something or give you a little insight here.
I’m going to use the Boeing as an example, because I had a trader asking some questions and I just want to help you guys out and just look at some things.
So looking at Boeing here, looking at the stock here we’re looking at the 108 level. We can see that it basically was hitting this point multiple times, ok? And over here it didn’t break it, this was the confluence point, there was no volume, there was no juice to take it higher. So it didn’t really go all the way through, it broke it, come back down, so there’s no conviction.
Now we’re doing a multiday span and it is heading higher, so zooming in on let’s say a two hour time frame, again you can see there’s what’s happening. The stock is moving, ok? It did back down and it didn’t hold it, right here the stock moved doing, moving back up, moving back down, coming back up here, now it’s going to retest this, so this is when we pick up and start watching the stock again.
A little bit more. Obviously we’re watching it all the way through but this is where we start looking at it a little bit more closely.
I’m going to zoom in just a little bit more on the 30 minute, so there’s our main line, ok? There’s our main lie, we’re watching it here on the 9th, we’re watching it, it didn’t break it, it broke on the 10th, that’s when we entered the stock. It broke in, here’s the volume, look at it, it’s a little bit slightly higher than the other days, on the opening days, so it has some conviction, it’s not anything amazing, but it’s got some, it’s got a little juice.
If you entered it there, fine. If you were a little hesitant, you could’ve just bought maybe 10 shares, if you normally buy 20 shares, you could’ve bought 10 shares. If you normally buy 100 shares, you could’ve bought 50 shares instead. Just if you weren’t ready yet.
What the stock is doing is, over here it’s creating these little basing patterns, so again, it’s moving up, and I’m just trying to show you, it’s not the perfect basing pattern, normally basing patterns take a little longer to develop, but let’s just say it’s kind of moving up in the stair steps pattern.
Here now you can add some as it’s going up and breaking these little support resistance lines, you can add some.
If you already missed that move on the entry, let’s just say now we’re already here and you’re like “oh man, I missed that move, I should’ve looked at this four or five days ago”. You can still enter the stock, but you have to have your own risk/reward strategy.
You have to say “ok, I’m going to enter it but I’m going to go with five shares now, instead of twenty shares, I’m going to go with five shares”. Or five shares instead of a hundred shares, so you go in lightly ad you see if it works in your favor, and then you can add to the position again, as it bases, or as it pops higher.
If you’re waiting for it to pull back to this level, 108 level again, you could be waiting for a while, and if that’s of with you, by all means that’s not a problem, there’s nothing wrong with that.
You just have to wait for the appropriate entry time, and the entry is key, it’s critical, if you entered it over here at 108 and you’re holding shares and you took half off over here at 109, you’re setting on a dollar profit, a dollar on a hundred shares, that’s a hundred dollars, and now you have fifty dollars to run. Think of it at 1000 shares, now you have a lot better proposition, it’s a thousand dollar run right there.
Basically you took 500 dollars in profit if you took half off and then you let the rest run, the other 500 right now.
So in either case, right now it had a $2 run, basically from that 108 level, so a thousand shares, $2 run, two thousand dollars, that’s great money for a lot of people. But you have to come up with your own risk and reward strategy.
If you’re looking at the 5 minute, let’s just say the 5 minute, and you’re looking at it right here, again you have these different points of support and resistance, it’s breaking higher, you could add just a little bit if you want, and then it goes higher, if it hits your stop, you have to mark a stop, if it hits that stop, your entry point let’s just say or a little bellow your entry point, then you have to be out, no question about it.
That’s how you trade these stocks, you have to have your own trading strategy, and you have to have your own risk and reward strategy. Without that, you’re just trading blindly. So don’t do it. Try to get in as early as possible and try and make sure you have your own trading system set up.
That’s the best way to trade; otherwise you’re just following people. Nothing wrong with that, but it’s not going to be consistent.