Wednesday, February 13, 2013

Renewed Vigor

Ok - so I haven't posted anything in a year but with the studying I've been doing and the success I've been having, it's almost time to change the name of the blog altogether.  So, starting last January, I went pro on taking Astrology Horary questions and have had a pretty successful run.  I'd say I'm about 70% accurate.  This year, starting in January, I've been studying the Elliott Wave Theory and a great e-book called The New Elliott Wave Rule.  Google it.  It makes so much sense.  As a result of that book, I've formalized a trading plan with penny stocks (anything under $7). 

Here's the basics:

I run my scan on www.finviz.com with the following requisites. 

The Average Volume must be over 1 million. 

The Current Volume must also be over 1 million.

The Price must be under $7

The Average True Range must be over 0.25.

I'm looking for each chart that I invest in to return at least $0.15. 

Go to www.freestockcharts.com and pull up the chart.  You'll want the following drawing tools - Fibonacci Retracement, Lines, Text and Moving Average.

Follow the counting guidelines of the Elliott Wave Theory and don't forget about the New Rule.  This is essential to determining where a chart is in the wave format.  Don't worry about every chart that you look at.  If the one you're examining gets too confusing - move on to another chart.  You WILL find one that is easy to count.

Once you have what you think is the proper count, use your Fibonacci Retracement tool on the last completed wave.  This will help you gain an idea of the next swing point.

To confirm this, you'll want to use a 10 day Simple Moving Average and 30 day Exponential Moving Average.  Follow the entrance strategy found at www.swing-trade-stocks.com

This is my trading strategy.  You may have a different system or find that my system is either not clear enough for you or that it doesn't seem to work for you.  That's fine.  This is not a guaranteed system and anyone who says they have a guaranteed system - STAY CLEAR!

So we have an entrance - here's my exit.  The good thing about penny stocks at over 1 million in volume and an ATR over 0.25 is the volitility.  When they go up, they can go up big.  That also means the go down big too.  I'm looking for a return of $0.15, so if my loss on the first day is $0.15 I'm going to bail.  This helps minimize your losses.

Now you can do one of two things.  If your return the first day is $0.15 and you think from your analysis that the stock is going to continue to go up - hang on to it and follow the exit plan outlined at www.swing-trade-stocks.com.  It's a good exit strategy.  I've used it but it's too safe for me.  I'm looking for quick returns.  So, if I've hit the lottery on a chart and it goes to $0.15 or above - I'm selling it by 3:40pm to collect my winnings.  If it only goes up a nickel and still looks like a viable stock, I'll hang on to it until I get my $0.15 return.  However, if it looks like it's going to trade sideways for the next week - it's gone.  I have other charts that I'm looking at and don't have time to waste my money on the hope that it might go up.

Simple and sweet.

Here's another catch.  The SEC does not consider swing trading as day trading.  They consider it investing.  They define day trading as buying and selling the same stock within a single day four or more times per week if those four trades account for 60% of your trades.  So if you have all of your eggs in one basket, and you buy/sell the same stock in one day - you can only do this three times in any one week, otherwise you have to have a margin account of $20k or more.  I don't like margin accounts.  If I loose my money and the margin, I'm in twice as much trouble. 

My advice is stay away from margin trading unless you want to begin shorting stocks - also a viable way of making good money with the Elliott Wave Theory.  In order to short stocks - you MUST have a margin account with $20k.  Most people reading blogs don't tend to have that king of cash, so for the time being - don't do it. 

Perfect the long position trading and then get into more complicated stuff.  Me?  I'm good with never shorting stocks.  There are literally thousands of stocks traded per day and at least one of them is on an uptrend. 

Good luck!

2 comments:

  1. So I read the post regarding the Wave analysis program, but I'm not willing to download it until I know a little more about it. It seems that it is intended to simply compare movement history in a single chart which doesn't really apply all that well to Elliott Wave as far as I can see. I've been studying Elliott for the past year and have really gotten into using it over the past couple of months to great success. I'm not sure how this program would benefit. Perhaps if a screen shot comparison of how the product is used and a successful trade completed, I may be willing to try the 30 day trial. Thanks for the comment though.

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