Shooting Stocks v5
Shooting Stocks v5
I know you’re excited to learn about the shooting stocks trading strategy.
But before we get into the details, you must understand why a trading strategy works so you’ll have the
conviction to trade (and not abandon it after a few losing trades).
So, let’s kick things off by understanding the concept behind shooting stocks strategy and why it works…
Explanation
Explanation
Just like our previous example, Boeing is in an uptrend as the price is above the 200-day moving average.
What’s interesting is this time around, the price formed an ascending triangle into the swing high at $160.00.
This is a sign of strength as it tells you the buyers are willing to buy at higher prices and the sellers lack the
strength to push the price lower (that’s why the retracement gets smaller each time).
For this setup, you can buy the breakout of the ascending triangle and have your stop loss 1 ATR below the
previous swing low or use a trailing stop loss.
Explanation
PRO TIP
You can overlay the 20-day
Unlike the earlier examples which are in an uptrend, Microsoft moving average on your charts.
is in a range market condition (but still above the 200-day
moving average). When it touches the low of the
Now the setup is what I call the breakout with a buildup—a buildup, that’s a sign the market is
tight consolidation that looks like the price is getting ready to make a move.
“squeezed”.
This is a sign of strength as it tells you the buyers are willing to
buy at higher prices (even at resistance).
Likewise, for this setup, you can place a buy stop order above
the highs of the buildup (or resistance) and have your stop loss
1 ATR below the lows of the buildup or use a trailing stop loss.
The % trailing stop loss is a simple and effective way to ride the trend.
Here’s how it works…
When you buy a stock, your stop loss is 20% below your entry price. Then, as the price moves in your
favour, you trail your stop loss 20% from the highs.
Here’s an example:
PRO TIP
If you want to ride a longer-term trend, you
can adjust your trailing stop loss to 25%,
30%, or even 40%.
But bear in mind, the wider your trailing stop
loss, the more open profits you’ll give back (no
two ways about it).
Explanation
Moving average is a Trend Following indicator. It can help you identify the trend, better time your entries,
and trail your stop loss to ride trends in the market.
For this section, we’ll focus on how to ride trends using the moving average indicator.
Here’s how it works…
When you buy a stock, your stop loss is below the 50-week moving average and you’ll hold onto the stock as
long as the price is above the 50-week moving average. You only exit the trade when the weekly candle closes
below it.
Here’s what I mean:
Explanation
The Chandelier Kroll is a variation of the average true range (ATR) indicator, which is a volatility-based
indicator.
This means as the volatility of the market expands, your trailing stop loss gets wider to take into account the
increase in volatility (and vice versa).
So to use a Chandelier Kroll stop, you must first decide the multiple you want to use.
For example, if you use a multiple of 5, then it’ll take the current ATR value and multiple it by 5, and that’s
the distance of your trailing stop loss (which is 5 ATR from the highs).
Here’s an example…
PRO TIP
If you want to ride a longer-term
trend, use a higher multiple like 6
or more. And if you want to ride a
shorter-term trend, you can use a
multiple of 3 or less.
Explanation
Unlike the earlier trailing stop loss techniques, riding the trend using market structure requires discretion.
The idea behind it is, as the stock is in an uptrend, the price will continue to make higher highs and lows.
This means you can trail your stop loss below the previous swing low and you’ll sell it only when the price
breaks through it.
Here’s an example:
PRO TIP
It’s common for the price to take out the pre-
vious swing low and then reverse higher.
So what you can do is, set your stop loss 1
ATR below the swing low and exit only if the
price closes below that level.
Now you’re probably wondering…
#2 Focus on stocks that have the highest rate of change (ROC) values
Here’s why…
Stocks with the highest ROC values (over the last 50-weeks) have the strongest momentum behind them—
and these are stocks which tend to outperform the market.
So, what does it mean for you?
Simple.
When you have multiple trading setups and you can’t decide which stocks to buy, then go with the one with
the higher ROC value. You have better odds with it.
PRO TIP
Cheers,
Rayner Teo