Multiple Trade Setups Multiple Days
Taking advantage of multiple trade setups over multiple days can be done as long as you take a few steps ahead of time.
In the article below, I'll go over an example of some setups, as well as some steps to put you in a position to take advantage of them.
Before we get into this though, let's go over what typically happens to many traders below:
A typical trader will be on the hunt for their next stock to purchase. They browse all kinds of forums, websites and other places to come up with ides. Some will use only technical analysis on their own.
This is all fine, but what happens next? They enter a trade, ride it to some point, and exit the position, hopefully at a profit. Great. What next?
Next, the typical trader will start from the beginning again, going through the same process all over. Searching for their next stock. You could even call it "looking for the next big thing, or big winner".
The thrill of the hunt and the possibility of the "next big winner" drives traders to keep searching, over, and over again. Sort of like the guy/girl who goes to a casino and tries out all of the slot machines looking for the one that will let them win big.
There's one problem with this (actually there are probably a few, but we'll get into one of them here): By exiting a trade and moving onto another stock, you are eliminating your chances of catching any significant moves, or even any future tradeable moves with that same stock.
Let's say you buy a stock and then sell it a few minutes/hours/days later (it doesn't matter when for this point). You sell it at a small loss, and then look for a different trAding opportunity because the last one "didn't work out well".
You move from stock to stock over the next few days and then you notice that the first stock wound up reversing at some point, and could have provided a sizeable profit.
While the example and technique below is not for everyone, it does have it's benefits for some. Remember, everyone should seek out a trading strategy that fits themselves!
Take a look at the chart below. It's of a stock SNSS, that I've used as an example another time recently here: Short Selling Setup SNSS
This is a 10 day chart which goes back to the end of the Descending Triangle pattern I previously wrote about as a good short entry. You can see I have labeled the initial short entry signal on December 24, 2009 on the chart.
After declining almost 25% producing a nice, profitable short trading opportunity, you can see that prices formed a recognizable support level near $1.08.
As the next few days went by, the support level held six different times, while forming another Descending Triangle.
As with any pattern that forms, when a breakout occurs, it usually occurs with conviction and increased volume. Breakouts from a pattern can occur in either direction as well. There is no set direction that happens every single time.
To take advantage of a pattern breakout, identify the end of the pattern and wait for, or try and anticipate a breakout in either direction. In the case of the chart above, the second Descending Triangle ended with a reversal to the upside, signalling a good long entry point.
Now, how could this be taken advantage of while it was happening if we had already gotten out of a short position after the first decline?
Once you exit a position, try keeping that stock on your watch list for potential future multiple trade setups, over multiple days. In this case, having a 10 day chart open after you exited the first short position would have allowed you to see the second pattern forming, and potentially the breakout to the upside.
In contrast, if you had already moved on to the "hunt" for another stock, you would never had known about, nor seen this second trading opportunity.