The answer is to trade and catch the bounce. But how? Here's how.
In my previous post, I mentioned that this is the time to test strategies that you either developed or learned. In this case, I tried to test, apply and practice the "Fish Ball" strategy, which I learned from Trader's Lounge.So let me walk you through. Note that this is how I understood from my readings and learnings at Traders Lounge. You may join the FB group, subject to their Admin's approval, read and interpret the strategy yourself. Click this link to go there: https://www.facebook.com/groups/504058690117433/
For the purpose of testing the strategy, I used my Investagrams virtual port.
What are the conditions required for a stock to qualify bounce play?
The following are the steps to screen a stock that has strong probabilities to bounce.- During non-trading hours, open Investagrams.
- Look for a stock that's trending/rallied for 3 or more days and then made a sudden drop for one or two days (long red candles) with none or just having a short bottom tail/wick.
- Once you identified this stock put it in your watch list.
- Get ready to trade the bounce during the next trading day.
For the sake of this example, I screened and found EURO. This stock has been trading earlier for several days and then the price hovered at the top for few days between 3.6 to 4.0 pesos. On 9 March, it crashes down to 2.75 pesos per share. On that day it plots a long red candle with short tail/wick.
Setting up the "Fish Ball" strategy.
- Prior to the market opens. Open Investagrams and open the stock in your watch list. In this example EURO. Set your time frame to 30 min.
- Plot Trix indicator and set length to 5.
- Plot Fisher indicator and set length to 9.
- Entry signal will be when the Fisher blue line crosses above the red line and;
- The Trix line is pointing/slanting upward.
- Sell signal will be Fisher blue line crosses below the redline.
In the above example, I entered on 10 March at 2.59 price. Then, I switched to 15 minutes time frame and exited the following day during the time when Fisher blue line crosses below the red line at 2.85 price level.
It was indeed an early exit as I switched to faster time frame. If I did not switch to a shorter time frame, the trade still open because there is no sell signal yet.
Try this strategy and don't forget to thank Traders Lounge -- not me.
by Napoleon Hill about the habit of saving. 
