Question:
Probably the most difficult thing I have found about investing is catching
the breakouts as they are happening. Here’s what I would find hellpful:
1. I would like to get a glimpse into your trading room and see what it is
you are watching & doing to catch breakouts. Is there some way you could
write an article telling us in simple language — here’s how I start my day,
here’s what I watch thoughout the day, here’s what’s on my computer screen
thoughout the day, here’s the thought process I’m going through once I spot
a possible breakout and here’s when I pull the trigger. Maybe write an
article about a typical trading where you talk us through your day.
Its seems that there are 3 things you have to watch throughout the day to
catch a breakout as it is happening: 1) price as it approaches the pivot
point 2) A chart showing daily volume (not sure if daily or intraday, say 5
minute would be best) and 3) Volume % increase. Are these 3 things
primarily what you are watching? What is it you have on your screen?
I’ve thought it out and it seems like I need a 2 monitor setup to do this: 1
monitor with real time quotes on the hottest of the hot stocks plus charts
on stocks that look like the price is approaching the pivot point that day
and a second monitor where you could watch volume % increase on those
stocks. This of course is now going to be available at SelfInvestors.com.
By watching the price, the chart & the volume –you should be able to catch
the breakout. Is this how you do it? If not –how. Could you please write
an artice on this. I’m tired of missing breakouts & then trying to get in a
stock that’s now 3, 4 or 5% past the pivot point!!! I want to learn how to
nail the breakout!
Well, I better get to work. I look forward to a long and profitable
relationship! Your service is awesome!
My Response:
So, what’s my process in seeking a quality stock and executing a purchase at the breakout…
The process really starts after the market close the day before…looking at the overall health of the market, pinpointing sectors and industries leading the market, then finding the best stocks within those sectors and industries. The design and layout of SelfInvestors is a reflection of the way I go about investing in the markets. In fact I use the website just as you might as a member – and it has allowed me to become a much more disciplined and profitable investor. The website has truly refined my strategy and to be honest I’m still refining that strategy every day. Hence, the changes in the service. I am constantly thinking about how I can make it easier to profit from the market and the tools you see now are just the beginning. After all, the site is only 4 months old! It’s amazing to think about the process that has been made in that amount of time.. I’ve got many new features planned in the coming months!
Ok, enough rambling. You asked specifically about getting in at the breakout. I can tell you that this is the most asked question I get from members and I can understand why. Very few have the ability to sit at their computers all day and watch the markets… even if you did, I think it’s a bad idea. Before I get into how I go about buying the breakout and how you can best catch the breakout let me just add here how I responded to this question in the past:
See My Previous Response Here
Ok, John..on to your specific situation. You are able to spend a couple minutes watching a stock as it approaches the pivot from what it sounds like. I think we are in similar situations. I certainly don’t have the time to watch real time price moves all day long either and wouldn’t recommend it if you could. It leads to irrational decisions and sloppy trading. In a nutshell, here’s the process I use (I like you’re idea of an article and will try and find the time in the next couple weeks to put together a more detailed approach .. how I go about using the tools at SelfInvestors and taking that info to execution of a purchase)
Night Before
1. Putting the daily report together keeps me focused on the health of the market and keeps me clued in to sector and industry group rotations
2. I’ll sort by Total Rank and focus on stocks that are highly ranked and within an industry that is performing well (this sort will most likely bring up all of the "Hot" stocks as well)
3. Make a list of these stocks and take a closer look.. Is the base quiet? Does buy volume exceed sell volume? How close is the stock to breaking out? I will probably add another column to the Breakout Tracker soon – % from the pivot.. this way you can sort and get a list of stocks of stocks that are closest to breakout. So you can be sure to focus on them the next day.
4. Once you have your list of a few stocks, you’ll enter them into a real time watchlist. I use TCNet Platinum for this.
5. Make sure you know what the average hourly volume is for each stock as well as it’s pivot point and any support/resistance levels (keep track of this in a log book). Keep in mind that the Breakout Tracker uses delayed quotes and is refreshed every 15 minutes. You’ll need a real time look at volume levels when purchasing a breakout.
Once you’ve got your hourly volume avg (Total avg volume/ 6.5 hrs in trading day) and your pivot point, you’ll want to set an alert (which you should be able to set through your broker or whatever trackig software you use) below the pivot point price. say 3-5% or so. Is the stock still acting quiet? Set another alert a bit closer. You’ll know when the stock is getting ready to run because the volume will pick up significantly and you’ll see price shoot up, pull back quite a bit, shuffle back and forth and then take off. This is the volatility and big volume at the breakout. Once the stock hits the pivot, execute the trade without hesitation. Believe in your research.. or mine:} and roll with it. If you are wrong… and you will be some of the time, cut your loss. If you’ll notice in the porftolio I am wrong more than I am right, but my average gain is more than double my loss for every trade I make. All it takes is a few big winners and that’s the goal with my approach. You must accept the fact that you may be wrong 50% of the time or even more.
Well, gotta run.. it’s been a long day. I realize I may have rambled here.. maybe even to the point of incoherency. Please let me know if you have any further questions and thanks for being a part of SelfInvestors.. have a nice weekend!