Troy asked 7 years ago
I have two questions that are somewhat related to each other related to trade entry. For the first - what are your thoughts on initiating a trade in the morning versus late in the day just before the close. I know generally the closing price is the most important. However, there are times that a stock triggers, and even appears to have good relative volume earlier in the day. There are times that I may enter with the trigger and good relative volume only to have the stock fade later in the day. Other times you can wait after the trigger and the stock takes off. Any tips on initiating the trade once the trigger is made?
Related to the above question, what are your thoughts on using buy or sell stops to initiate a trade? I can see that can be a tool to help with trading if busy during the day with work and not able to watch the market closely or stop to look at a stock if an alert is triggered. The downside is that you lose some of the control or last look/verification that conditions are good for the entry.
Appreciate any thoughts/tips you may have on these items.
Thanks!
Troy
Pat Walker Staff answered 7 years ago
Good evening Troy,
You ask great questions! Let's go thru them in order. I don't mind putting a trade-on in the morning, but hardly EVER do I buy the first 10 - 15 minutes if not longer, (30 Minutes.) Tied in with this is the fact I do NOT like buying gap-ups at the open. I normally wait 20 - 30 minutes to see if a clean couple of bars form. Then I have a precise entry and a LOW if the stock drops. After the first 30 minutes, if a stock pushes thru the pivot price and the volume is good I will buy with no hesitation. Of course, I want the market to be acting okay also.
You bring up one of the frustrations of buying/trading/investing. Buy and have it drop. ERRR. That's why I REALLY Key on clean and simple bases or patterns so I know other people see it too. Increases odds more will buy stock when I'm buying. Overall, if we have a CLEAN entry and volume is good, I'm buying right there after 15 to 20 minutes.
In relation to stops, I think they're great. But again, I'd wait to put the stop in until after the market is open 15 to 20 minutes. (and the market is acting okay.) I use stops when conditions are right. Let's take this a step further. I'm sure you know this but want to share. You can put in an "attached" stop order. Here's how it works. Let's suppose you want to buy a stock at $20.15. After the market has been open for 20 - 30 minutes you put in the buy stop at $20.15. AT THE SAME TIME you put in and ATTACHED the SELL-STOP ORDER. Let's suppose you don't want to lose more that 25 cents. You would place and ATTACHED sell stop at $19.90. What does this mean. If your buy stop gets triggered your sell stop gets ACTIVATED. This way you are PROTECTED. Now, this is important. If your buy stop is not triggered your sell stop is NOT activated. That way you're not selling a stock you don't own! I used this frequently. It protects me to avoid big losses.
Finally, I understand your concerns. The solution is to FOCUS on the best, clean, and simple patterns on the daily charts. I would lean on longer price bases and patterns. I would avoid trying to do this with swing trades or bounce trades. They have a higher failure rate and also "move around" more on the daily pattern. Could get stopped out a lot.
I hope this helps! Please ask more questions!
Sincerely,
Pat
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