Lets look at few candidates...
- Consolidation for few days/ weeks/ months - conserving energy and getting ready for next leg up
- Near 52 week HIGH - within 15% of 52 week high which has higher probability of making NEW HIGHs
Is this a sure bet!!!
- There are NO GUARANTEES in stock market
- Every position comes with a inherent risk, hence risk management is essential
How did we find these candidates?
- Stocks within 15% of 52 week HIGH (time frame daily) - this helps to narrow your search and search for stocks near their 52 week HIGH
- ADX is less than 20 (time frame daily) - this narrows the search further to find stocks in consolidation pattern
- Price is greater than 10 - we do not want to trade stocks with price lower than 10 rupees
- Average daily volume for 30 days is 1000 - liquidity is essential in case we need to get out
- Visual identification (time frame weekly) - it is very easy to visually identify potential candidates
- Find out earnings date for stocks you have in your portfolio, so that you are aware of major events
- Understand current market direction and decide if you want to remain invested based on market scenario
Things to remember:
- No matter how great the company is and how stellar the earnings are, if market is in correction then the stock performance will be affected
- All boats rise in a rising tide, in short if market moves up then most stocks will also move up and vice-verse. If market is doing well then selectively chosen stocks have higher probability to provide good returns in short duration
- If a stock position does not work in your favor then get out, cutting losses is not easy but necessary, ONLY a disciplined investor/trader will be successful in long term
- Use trade size calculator to manage risk per position
Be disciplined and manage risk appropriately...