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 ------------------------------------------------------- Continuation ------------------------------------------------------- Buy Low – Sell High Stocks that are identified in a range bound pattern are said to be moving sideways. There are lows and highs that occur over some period of time. Part of the research we conduct is to quantify the pattern by analyzing price and time periods. For a more detail description please refer to the Strategies tab on the bottom of this page. Buy low hold the stock for the mathematical average number of days in the up part of the cycle then, sell when that mathematical average target high price is reached. Confirm the high price then short sell the stock. Hold the stock for the mathematical average number of days in the down part of the cycle, then once the stock hits the mathematical average low price sell to cover the short. Repeat this process for as long as the stock is moving sideways with approximately the same price points. Using this technique yields very nice conservative returns. All good things must come to an end! When one or more of the criteria we use to analyze a stock experiences sufficient changes the stock falls off of the weekly research list. At this point the pattern is changing and we no longer use the stock in a range bound strategy. When-To-Buy The strategy for entering range bound stocks involves placing two orders. First, the Buy Limit and second a Stop Loss. The Buy Limit of the support identified in our research plus or minus $.25 is a good entry point. Immediately place a Stop Loss order for 3% of the stock purchase price. Determining risk is a personal choice. Always confirm direction of the stock. You can use a range like the plus or minus $.25 discussed above or wait until the price is over support by 20%. Practice trading will assist analyze entry and exit points before risking any of your own money. Do not chase the price! Always confirm the historical support levels identified and use a range that you are comfortable with at the purchase. If the purchase price is not executed, so be it. This is a conservative strategy and high volatility does not help to recognize consistent profits. Once you buy a stock you can make money but you can also lose money. Others have recommended that a stop loss of 10% or higher is needed because of abnormalities in bid and ask prices that occur during the trading day. Investing in stocks that are range bound involves analyzing the past performance of the stock. If large spikes in prices occurs it is most likely because the pattern is changing. It is better to run away and have the ability to invest another day! Remember, if the drop in price is below the 3% Stop Loss you can always confirm the direction and price then enter again. If the drop in price were an abnormally most likely the stock would still be on next weeks recommendation list. If the drop in price is not an abnormality and indeed the pattern is changing you have minimized your loss. When-To-Exit or How To Continue The following list shows the possible exit strategies for investing in range bound stocks:
Issuing a Sell Limit along with the Stop Loss is a conservative exit strategy. First, confirm your broker allows two open orders on the same stock (conditional trading). The Sell Limit is established from the historical resistance level identified in the whentobuy.com research. If historical analysis shows that the stock moves from its support in ten days to its resistance and typically moves $8.00, then select an exit price that makes you comfortable. For example, if you buy 100 shares of a stock for $20.00 you have a Stop Loss identified as $19.40 and a Sell Limit of $26.00. Always compute potential loss, breakeven and potential profit for each stock you may buy. At the end of each day move your Stop Loss up in order to protect your profit. For example, using the figures above if at the end of the day the stock you purchased at $20.00 closes at $20.95 update the Stop Loss by 3% or Stop Loss to $20.32. The Sell Limit remains at $26. Another strategy to exit a position is to adjust the Stop Loss and Sell Limit at the end of each trading day. Here you are not looking to exit at the historical resistance. You are continuing to hold the stock as it breaks through its old pattern and begins to form a new pattern. The Stop Loss first limits your loss then once the stock price hits the breakeven (purchase price plus commissions and fees) the Stop Loss protects the unrealized profit. Moving the Stop Loss up during the day or at the completion of each trading day protects your unrealized profit until the stock eventually hits its resistance level and starts back down. Using this strategy a Sell Limit could be established at the current resistance level and move it proportionately with the Stop Loss. This way if the stock has a day when it spikes up in price you can get out with a nice profit. Remember historical analysis or technical analysis is not a guarantee that the stock will perform exactly as in the past. Always use a Stop Loss to limit your loss and to protect your unrealized profits. The weekly selections are the easy part - knowing how to execute there is the real challenge! Want to learn more? Join now!  Back  | Range Bound | Continuation | Strategies | Practice Trades | Performance | Cancel | Options | | Order Now | Return Home | Home Business | Digital Economy | Sign In | Disclaimer | Training Center | FAQ | What's New | Contact Us | |
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