If You're New Here, Welcome! Learn One Of Our Techniques. Find Support And Resistance Zones In Advance. Knowledge Is Power And Money! Details Here.
photo credit: Tomi Tapio
Short-term stock trading can be profitable and risky! It really takes an unemotional trader to successfully get in and out of a quick trade. You must trade like a machine! Here are a few suggestions for your consideration –
- Reduce the amount at risk per trade — if normally risking 2% of your trading capital per trade cut it to 1% per trade.
- Do your homework the night before — don’t try to take a trade on the fly during the morning or intraday.
- Know your stop price before you enter the trade.
- Obey those stops without question — there are unlimited trades — trading capital is limited, don’t blow it!
- When you have a couple of unsuccessful trades, stop trading. This type of trading might not be your style — that’s okay because there are all sorts of trading methods.
One of the better ways to find stocks to short is to find those stocks that are already weak. Trading below the 200 day moving average is a sign of weakness — one of my trading idols, Larry Connors, recommended this criteria. Stocks under the 200 will try and move back to the moving average, but it will act as resistance.
Here’s one of my scan’s to find potential shorting candidates — set up your charts like this:
- On a daily chart plot a 5 period simple moving average and a 200 day simple moving average.
- Plot a 2 period RSI (Relative Strength Index)
- Volume should be greater than 500,000 for the past 20 days — no thinly traded stocks.
Here’s the set-up:
- The price must be less than the 200 day moving average
- Go short when the RSI is 98 or greater
- Cover when price closes the 5 period moving average
Make sure to set a stop in case price continues to rise — good luck!
