Try this daytrading approach
Often when day trading, you will
notice that a stock has several trendlines on the same chart. Stocks
will often accelerate their level of ascent, producing a steeper and steeper
trendline as time goes on. For an example of this, let’s take a look at a three
month chart of
(
AMD |
Quote |
Chart |
News |
PowerRating).
The blue line on this chart represents the longer-term, or
primary trendline. This trendline has been in place for a long period of time
and has been tested several times, which means it has a high level of validity.
The green line represents the newer, short-term trendline.
Notice how AMD’s rate of increase has accelerated over the past month or so.
This trendline is not as well-established or tested as the primary trendline.
I like to use the short-term trendline for my entry point, and
the longer-term, primary trendline as my indicator for where to place my stop.
Just be sure that the short-term trendline entry point is close enough to the
longer term trendline stop level for you to be comfortable with your max-loss on
the trade before you enter it!
So for AMD, I would look for a dip to the short-term (green)
trendline to buy into. I would then set my stop at a point that would require
the primary (blue) trendline to be broken by .25 (around 1%) or more to force me
out of the trade. This gives you a nice angled stop line that results in a
steadily increasing stop level throughout the trade, and allows you to stay in
an uptrending stock for as long as the ride will take you.
Note that like all technical analysis, this method applies to
any time frame and any stock. So no matter if you are day trading GOOG or
looking for swing trades on MSFT, this approach should work very well for you.
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Andy Swan
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.