Introduction Hello everyone! Like I said in a previous idea, I will be doing an educational post today about trading strategies. Unlike the previous strategy I talked about, this one is used during uptrends and downtrends, and doesn’t prioritize buying at the beginning of these moves. —————————————————————————————————————————————————————————————— Rules of the strategy Uptrend 1. Buy when there is a retrace to a support/resistance after an earlier break of the same support/resistance. 2. Put your stop-loss below the support right under the support the stock/crypto retraced to. 3. Don’t have a set target unless you think the price will reject strongly from a certain level. 4. Sell 50% when a support level formed during the uptrend is broken or there is a break downward of the 50 MA. 5. Sell 100% when another support level formed during the uptrend is broken or there is a break downward of the 100 MA.
This is the best case scenario when using this strategy in an uptrend:
Downtrend 1. Buy when there is a retrace to a support/resistance after an earlier break of the same support/resistance. 2. Put your stop-loss above the resistance right above the resistance the stock/crypto retraced to. 3. Don’t have a set target unless you think the price will reject strongly from a certain level. 4. Sell 50% when a resistance level formed during the uptrend is broken or there is a break upward of the 50 MA. 5. Sell 100% when another resistance level formed during the uptrend is broken or there is a break upward of the 100 MA.
Here is the best case scenario when using this strategy in a downtrend: —————————————————————————————————————————————————————————————— Apple stock As you can see on the chart, if we used this strategy back in August/September, we could’ve made 12.5% returns in about 27 days, or less than a month. Thus is the power of buying pullbacks. —————————————————————————————————————————————————————————————— How does this work? When your buying pullbacks, your essentially getting into a trend which has temporarily been pushed down by the “bears”, or sellers. Since the overall direction is bullish, or upward, these can be seen as bargains in a “premium” (or high priced) environment. The moving averages and use of support and resistance help confirm the end of a trend and tells you when to get out and get in. (This is pretty much the opposite when talking about downtrends; your looking for premium prices in a bargain environment to short. Support and resistance/moving averages still help however). —————————————————————————————————————————————————————————————— Final thoughts This is one of my last posts for the year. I may or may not do another one before 2021, depending on whether I see any long (or short) opportunities in the market. Hopefully everyone learned something while viewing this idea, if not then the majority of people. Happy new year!
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*not financial advice, just an idea which aims to educate others. :D