14-day ADX must be greater than 30. For those unfamiliar with ADX, go to the discussion of ADX.
The 14-day +DI must be greater than the 14-day ?DI.
Wait for a 3 day correction. This means that the stock must make three consecutive lower lows or any combination of two lower lows and an inside day.
Buy on day 4 only if the stock moves .10 above the day-3 high.
If filled, place a protective stop .10 below the day-3 low.
If the position moves in your favor, use a trail stop.
Use of proper candlestick formations in the third bar will increase probability of a profit. See The Three Day Hammer.
Setup for Shorts
14-day ADX must be greater than 30. For those unfamiliar with ADX, go to the discussion of ADX.
The 14-day -DI must be greater than the 14-day +DI.
Wait for a 3 day correction. This means that the stock must make three consecutive higher highs or any combination of two higher highs and an inside day.
Short on day 4 only if the stock moves .10 below the day-3 low.
If filled, place a protective stop .10 above the day-3 high.
If the position moves in your favor, use a trail stop.
Use of proper candlestick formations in the third bar will increase probability of a profit. See The Three Day Hammer.
General Thoughts
Near the close of day one, if the stock appears to be closing down for the longs or up for the shorts, I generally close out the position. I find the best stock picks from these trades are profitability from the start.
If you are not stopped out by close of day 5, close the position.
This article was written by light of stockhideout.com Stock Message Board
