STOCK TRADING SYSTEM
Buying a Dip Stock Trading System
These different instances will qualify as buying a dip in a stock. I will employ similar strategies in each one of these examples:
1. A stock which is trading in a rising channel or horizontal channel and is at or near the bottom line. I will buy 1/3 of a full stock position at 5 -15 cents over the trend-line. I will be more flexible on my stop loss because I took a relative small position and give the stock a chance to bounce. If it falls below a predetermined price, I will sell. If the stock held at the trend-line or slightly below it and started to move up, I will add 1/3 of a full stock position at some predetermined point.
1. A stock which is trading in a rising channel or horizontal channel and is at or near the bottom line. I will buy 1/3 of a full stock position at 5 -15 cents over the trend-line. I will be more flexible on my stop loss because I took a relative small position and give the stock a chance to bounce. If it falls below a predetermined price, I will sell. If the stock held at the trend-line or slightly below it and started to move up, I will add 1/3 of a full stock position at some predetermined point.
I will add the final 1/3 of a full stock position as the stock continues to move in the right direction at a predetermined point and complete my desired position. I will trail a stop and tighten it as
the stock approaches the top range of the trading channel.
2. A stock which has fallen sharply from recent highs and the outlook for the stock remains bullish. I will use the same stock trading system here. I will look for the first signs a rally might take place, looking at intraday activity. I would like to see a reversal pattern (such as double bottom, round bottom, falling wedge, etc.) on an intraday chart with heavy volume at the bottom. I will buy 1/3 of a full stock position there, and 1/3 of a full stock position twice more on the way up at predetermined entry points to complete the desired position, as the stock moves in the right direction. I will again let the stock wiggle when I start the position and give it a chance to prove it wants to go back up, I will be more liberal with my stop loss as it is a small position at first.
3. A stock which has sold off and is at support levels. I will use the same stock trading system here. I will buy 1/3 of a full stock position at 5 -15 cents over the support level. I will let the trade wiggle and keep a stop loss just under support. If support holds, I will add the remaining shares as the stock moves up at predetermined entry points, 1/3 of a full stock position at each point and trail a stop.
4. A stock that is testing a previous bottom and might form a double bottom. I will use the following stock trading system here. Buy 1/4 of a full stock position at the bottom level or close to it. Add 1/4 of a full stock position on the way up to the previous top. Add the remaining 1/2 of a full stock position once the stock breaks out over the previous top. The initial stop loss should be liberal as many times a double bottom pattern has a lower second bottom than the first one.
3. A stock which has sold off and is at support levels. I will use the same stock trading system here. I will buy 1/3 of a full stock position at 5 -15 cents over the support level. I will let the trade wiggle and keep a stop loss just under support. If support holds, I will add the remaining shares as the stock moves up at predetermined entry points, 1/3 of a full stock position at each point and trail a stop.
4. A stock that is testing a previous bottom and might form a double bottom. I will use the following stock trading system here. Buy 1/4 of a full stock position at the bottom level or close to it. Add 1/4 of a full stock position on the way up to the previous top. Add the remaining 1/2 of a full stock position once the stock breaks out over the previous top. The initial stop loss should be liberal as many times a double bottom pattern has a lower second bottom than the first one.
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