Tuesday, May 24, 2016 9:54:27 AM
When to Pull the Trigger? BY ART HILL
This is the million Dollar question and I see three options for playing pullbacks. First, chartists can buy when the ETF becomes oversold and then set a stop somewhere underneath. The blue arrows show the first oversold readings for SPY. Second, chartists can wait for the ETF to become oversold and then buy on the first sign of a reversal (gap or StochRSI pop). The green callouts show the two gaps. A stop-loss can then be set just below the low of the pullback. Third, chartists can wait for an actual breakout on the price chart. A stop would also be set just below the low of the pullback and this would most likely be the widest stop of the three choices. In other words, a breakout trade would have the most to lose on a bad signal.
I am somewhere between the first and third options because I am waiting for oversold conditions and then looking for some sort of bullish sign. I am using end-of-day (EOD) charts and closing prices because I do not trade based on intraday price action. It is just a personal preference. In fact, all of this is a personal preference and traders need to find their niche. The decision and the responsibility are yours at the end of the day. The most important thing to do is to PLAN YOUR TRADE and TRADE YOUR PLAN. Work out the entry, stop-loss and profit targets BEFORE putting the trade on.
This is the million Dollar question and I see three options for playing pullbacks. First, chartists can buy when the ETF becomes oversold and then set a stop somewhere underneath. The blue arrows show the first oversold readings for SPY. Second, chartists can wait for the ETF to become oversold and then buy on the first sign of a reversal (gap or StochRSI pop). The green callouts show the two gaps. A stop-loss can then be set just below the low of the pullback. Third, chartists can wait for an actual breakout on the price chart. A stop would also be set just below the low of the pullback and this would most likely be the widest stop of the three choices. In other words, a breakout trade would have the most to lose on a bad signal.
I am somewhere between the first and third options because I am waiting for oversold conditions and then looking for some sort of bullish sign. I am using end-of-day (EOD) charts and closing prices because I do not trade based on intraday price action. It is just a personal preference. In fact, all of this is a personal preference and traders need to find their niche. The decision and the responsibility are yours at the end of the day. The most important thing to do is to PLAN YOUR TRADE and TRADE YOUR PLAN. Work out the entry, stop-loss and profit targets BEFORE putting the trade on.
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