Lots of people say “Buy Low, Sell High”…
But how are you supposed to do that? What counts as low?
How do you know the stock isn’t going to drop lower after you buy it?
That’s why I trade in a completely different way. It goes completely against common sense.
So what do I do? I start by looking for a stock that has made a new 52 week high.
But that alone is not enough. The stock should also be in a good, strong, bullish trend. Somewhere between 4-6 months is what I look for.
Here are a few more parameters I look for to filter out the junk:
- It must trade on a major exchange (no penny stocks)
- Has over 500,000 shares average daily volume
- Greater than $25 per share
- The stock has tradeable options
So to recap:
If you find a stock that has hit a new 52 week high, has been in a good 4-6 month bullish trend and meets the criteria listed above, you can move to the next step.
Here’s how I trade it:
I place what’s called an OCO trade: “one cancels other”
What this means is you place one order above what you paid for the stock, where you’d like to take sell and take your profit.
Then you place the other order 7% below where you bought the stock. So the most you can lose is 7%.
And again, these are not separate orders: You place them together so that when one triggers, the other one automatically gets cancelled.
Again, doing it this way, the most you can lose is 7% from where you entered the stock.
If your broker doesn’t have that kind of trade for you to set up, you can do something else.
You can just do a regular stop order. Put it in for 7% below what you paid for the stock, so you limit your downside.
Some brokers even let you set what’s called a trailing stop. That’s an order where the stop “follows” the price as it rises.
So if the price rises 10%, but then falls 7%, the sell order automatically gets triggered and you end up with a roughly 3% gain.
It’s a good way to set orders so you don’t have to constantly be watching the market, but also you protect your downside.
Add that to your trading and stay tuned for 2024. We’ve got a lot of great lessons in store for you.
Trade well,
Jack Carter
P.S. If you want to see what I’m trading… click here and watch the video.
