Hi folks,
Just expanding a little on Rich Kid's thoughts ... and
presenting some entry and exit strategies, that see us
trading to profitable targets, figured BEFORE we take
the trade.
..... if we use the commonly quoted figures of 90%
of traders losing in the markets, then what are those
other 10% doing to be trading winners consistently?
Mostly, it has little to do with stop losses, but a lot
to to with better market timing .....!~!
If we can enter a trade early in the trend then we can
afford to sell into a rising market, as we approach our
exit target, which is a lot easier than trying to bail out,
as the masses head for the exits ...
By entering a trend early, we also limit our risk considerably.
..... there's many different technical approaches that
trader use to enter trades, but if they are not optimized
for better market timing, then traders can often sit on
stocks for extended periods waiting for something to happen
and risking the propsect of the market testing new lows,
due to lack of news.
Staying with the KISS principle, estimating exits from some
market geometry can be VERY EASY ... as an example, using
the rounding bottom or ellipse, there's two places that very
often provide resistance ... those points are the horizontal
axis through the ellipse and the upper side of the ellipse,
particularly around highs on earlier dates in the pattern.
Look at BRW, in late-February for example, it broke out
form a consolidation zone, at about 4 cents and continued
its path as expected, supported by the ellipse.
Chart below shows the breakout point and we can easily see
that the pivot or horizontal axis for BRW is located about
6.5 cents ..... price actually made it to 7 cents and with
high volume of 16 million shares traded, it closed that day
at 6.4 ... just under our target price ..... since then, it has
pulled back down to test support at 6 cents.
So, rather than waiting on the market to tell us when to
exit via a stop loss, we have already made our bucks by
trading to an obvious exit target.
..... yeh, yeah, yeah, now we'll get the gurus saying that
we bailed out too early ... but the truth is, while they are
waiting for BRW to breakout again, we have already taken
a trade in another stock, already primed for a move.
There's no question, that a stock in the later part of an
ellipse pattern can be see trading with high momentum
..... it is a very common occurence to see stocks continue
their run up, after consolidating around the ellipse axis
for a while ...... and if we want to re-enter, when our
time axis analysis gives us a signal, then we have had
our capital working harder elsewhere, in the meantime.
-----
Another example is the v-bottom, which is very obvious
on the charts and can be exploited just as easily as the
previous example.
Let's look at KYC this time ..... we can see on the chart,
that this week will mark 90 days down from its last
significant high and the candle count is extreme, at
around 21 negative.
In fact, the KYC price has effectively halved in that time,
until last Friday, where it gave a signal low by opening
on its lows and closing on its highs ..... that low is yet
to be confirmed by subsequent price action, but Friday's
low is likely to be support for the immediate future.
Some aggressive traders would have entered at the
close on Friday 21042006, as they saw the stock close
on it highs ... this is evidenced by the high volume
for the day.
Less aggressive traders will wait for a break above
Thursday's high, before entering the trade.
Principal exit targets for this trade will be retracements
of the 79-cent range down, at 111.5, 124.5, 137.5 and
100% retracement at 1.64 ... and often, these targets
are reached on our key time targets, confirming our analysis
and a likely impending swing.
-----
Better market timing is also a desirable trait for long-term
investors, as well ..... if we plan to hold a stock for the
long haul lets optimize our entry, so we can get the
satisfaction of watching it tick up slowly day-after-day,
at a steady and sustainable rate.
Our GOG trade is a good example, where it was obvious
around the June 2005 solstice, that GOG was working its
way along the extreme lower edge of tthe ellipse, in
accululation mode, until the end of July, where we had
a time cycle signal for an entry, around 17 cents.
In early September 2005 we also had a time cycle,
marked by the vertical, magenta dotted-line, which
turned out to be a breakout for a sharp move up.
Since then, GOG has been largely guided by the lower
edge of the ellipse and while this one has also found
resistance at the ellipse axis, we will hold on for another
sharp move, with an exit target arount 44-46.5 cents and
key target dates being 24042006, 28042006, 12-15052006
and 19052006 (magenta long cycle on chart).
-----
So in summary, by timing our trades better, we reduce
the risk involved and optimize our gains on any particular
leg up, by trading to obvious targets, as shown in our
market geometry.
Such trading also helps with our trading psychology as well,
as WE have determined HOW this trade will be executed,
in terms of entry and exit ..... in-between the market can
do as it pleases, whilstsoever it is trading in our favour ...
-----
Finally, there's some more reading about TIME stops
and stop losses, in "Trading Plan ... Wozzat", at:
Click here for Trading Plan ... wozzat??? ... more about entries and exits .....
It is presented in a .pdf file and be sure to read Phantom's
Gift, as well ... there's a link to it about page 39, on memory (?)
Enjoy the read.
happy days
yogi