Anil - I'm not clear what you mean here - can you clarify? Assume you might mean buy just above the previous day's high or sell short just below the previous day's low?
I was thinking about that the other day. Would you use a stop? I haven't paper traded this much, but you have to set your stop far enough that you dont get stopped on short term corrections during the day. I would like to trade this idea without a stop, but if you dont have a stop, you cant really trail it and you would either have to trade it live, or have a profit target set. I think there is a ton of potential in this and will keep on testing. I have been trading it in the FX, what market are you looking at?
I love this strategy, it has improved my accuracy and limited my trades which I get stopped out on. Let me see if I can create an image for you...
If you have a chart avaliable look at RIG from the end of APRIL 08 to the beginning of MAY 08
These are MY rules....
1. Wait for a strong stock to pullback.
2. Wait for bullish candle formation (Hammer in RIG's case) DO NOTHING ON THAT DAY
3. That evening I set a buy order for 10 cents over the HIGH of that bullish candle effective after the first 15-min of trading.
4. I set my stop 20 cents below the LOW of that same bullish candle.
If the pattern failed or gapped up then failed the next morning within the first 15-minutes my order WOULD NOT trigger. Usually I find strong hammer formations and after the first 15 minutes the stock is at or just over my entry point. My stop is placed at the same time. This strategy has really progressed my trading. By waiting till the FOLLOWING day of a bullish candle, it helped to eliminate false breakouts.
This is my strategy, but feel free to combine it with other indicators, and modify the 10cents/20cents buy-stop rules. That is just something I came up with after doing hundreds of these trades and being stopped or filled then having the stock fail. Thats what I came up with and it's worked fantasitcally for me. Granted I still have loosing trades, this strategy helps pick strong winners.
Comments
If you have a chart avaliable look at RIG from the end of APRIL 08 to the beginning of MAY 08
These are MY rules....
1. Wait for a strong stock to pullback.
2. Wait for bullish candle formation (Hammer in RIG's case) DO NOTHING ON THAT DAY
3. That evening I set a buy order for 10 cents over the HIGH of that bullish candle effective after the first 15-min of trading.
4. I set my stop 20 cents below the LOW of that same bullish candle.
If the pattern failed or gapped up then failed the next morning within the first 15-minutes my order WOULD NOT trigger. Usually I find strong hammer formations and after the first 15 minutes the stock is at or just over my entry point. My stop is placed at the same time. This strategy has really progressed my trading. By waiting till the FOLLOWING day of a bullish candle, it helped to eliminate false breakouts.
This is my strategy, but feel free to combine it with other indicators, and modify the 10cents/20cents buy-stop rules. That is just something I came up with after doing hundreds of these trades and being stopped or filled then having the stock fail. Thats what I came up with and it's worked fantasitcally for me. Granted I still have loosing trades, this strategy helps pick strong winners.