If you are busy and you don’t want to spend hours analysing charts or refreshing your browser consistently to see how your trades are doing and want to find a good entry spot regardless how the market is doing because you don’t believe you have the crystal ball to forecast the future, here might be a system for you.
1. Identify a trend
When you’re looking at a stock chart, you want to see consistent data pointing in one direction. With other words identify the trend and follow the money-flow. The trend is your friend, therefore, ride with the tide and not against.
2. Find a pattern
You need a clear pattern. Once you’ve seen a particular pattern enough times, you have a good idea of how a stock is going to behave after it appears. If you don’t see a common pattern within a chart, then scrap the trade entirely.
3. Use the squeeze indicator
Like a long-distance runner, the initial move up in a stock is like the first leg of the race. The stock is moving quickly in one direction.
It also has periods when it is resting, taking a breather for the next move up and showing a bit more sideways action. It might look like running out of steam but what we really want to do is get into the stock during this resting phase. We do this because the rest period is when the volatility on the stock is compressing and getting ready for the next leg of the race. After you see a clear squeeze, you can be confident that the stock has had a chance to rest and is ready to continue along in the direction of the trend.
Sven Franssen