For those folks new to the trading universe, this is not about grabbing
your favorite sidearm and heading to the shooting range for some
practice ventilating a few targets.
In this case, the thing we’re shooting for is cash. And the range is now a
single stock that we have to enter on quick dips and leave on quick
gains.
Don’t worry, if all of that sounds like some sort of alien love language,
it’ll all become as clear as mud as you read through the rest of this blog
entry.
For anyone whose gone through my course Learn To Fish Part II, you’ve
heard me say a couple of things over and over again.
- If something is in the overbought area it will not stay there for
long. - Hot stocks make good, quick in and out plays but be careful with
them as they are volatile.
We’ve all seen the alerts come across Discord, or Twitter, or Email that
say “I just made X bajillion dollars sniping stock XYZ!” We’ve also all
seen the ones that say “I just lost X dollars sniping stock XYZ”
So how do we remove some of the risk, and still leave us able to get
paid intra-day gains?
Let’s walk through the method that I use to do just that.
For me, that starts with seeing different time frames simultaneously so
that I can manage entries on dips while ensuring upward momentum to
carry them back up.
The best way to see what I mean in the above is visually, so let’s start
unpacking this through some examples.
On the 1min chart below I show two entry levels. One on the recurring
bottoms on the MACD (white arrows) and the second as micro
movement entries as shown by the yellow arrows
In each, we would enter where we see the arrow pointed up, and exit at
the blue arrow pointed down. Note that each exit is characterized by
either the stock being overbought, or a change in the direction of the
MACD line as shown by the orange arrows.
These are your cues to get out.
Also, note that in the micro moves, a large engulfing red candle is
typically followed by an immediate green candle and some level of
recovery.
This will typically hold true for most stocks in a similar situation.
Now, how can I be confident that the 1 min and micro entries will likely
recover, and not keep sinking?
By looking at the longer time frames simultaneously.
In the 15 min chart below, you can see we had a very strong uptrend
continuing on this longer time frame.
This is shown by the big arrow in the center, and you can see the time
frame perfectly outlined (small arrows at the bottom of the chart) our
entry and exit positions we showed on the 1 min chart above.
In the simplest terms, that meant that we had a lot of buying pressure
coming up behind the 1min and micro dips, which means none of those
dips would likely go too far, and they all were likely to quickly recover
with all the buyers present.
The net effect of that is you can be far more confident in these quick
entries and exits and use more size to realize larger gains.
In the example we’ve shown, you would’ve had up to seven
opportunities to do so.
The safest places would be on the 1 min dips at the bottom of the
MACD, but by having an eye on what is happening in the longer time
frames, you can predict what will happen for each of those dips.
Accumulating seven opportunities to gain in just a few hours goes a
long way, and with the method detailed above, it controls your risk of
realizing those gains into cash.
Now then, let’s do some shooting!