Learn stock Investing, Day Trading system techniques rules and strategy-Potential Entry | Exit in the Market breakout & gap strategy
1 stock system investing
Skip Navigation Links
    •   About US
    Market Activity
    World Indices
    Market Watch
    Customer Service
    Learning Center
    Economic Event

Join Now Day Trading

Advertise 2

Stock Trading & Investing system

Day Trading Techniques

There are many techniques to find good potential instrument for Day Trading in the market. In this section I show you some well known techniques for trading.

Moving Average - day trading | stock trading system

27 Moving averages helps to know the direction and strength of existing market trends and can help to determine when a market trend change has taken place. The most popular moving averages are the 10- and 50-day averages.

For long term investment strategy 100 days and 200 days moving averages working good to know long term market trend and also it working as a good resistance and support. A price close below a moving average line is a warning of a potential trend change.

If price is above its 10- day and 50-day moving averages, that many technical analysts considering as a strong buy member for investment in the market.

Moving average as a curving trend line providing support during sell offs in an up trend and resistance to bounces in a down trend and the breaking of a moving average line can carry the same meaning as the breaking of a trend line means a change in short-term trend. Some of the longest and strongest up trends and down trends are established when the 10-DMA crosses up through the 50-DMA (Moving average). This is a proven trading system to picks share so many trader giving more weight age on MA for day trading and investing in the market.

Day Trader needs to use smaller time span like 10 and 50 hour for day trading. Long term investor or 401k investing 3-week moving averages and 10-week moving averages of weekly data are the good indicator.

It's a good idea to use your favorite another technical indicator like: Average Directional Movement Index (ADX) | Stochastic Oscillator (STO) | Commodity Channel Index (CCI) | Rate Of Change (ROC) | Percentage Price Oscillators (PPO) | Relative Strength Index (RSI) | Chalking Money Flow oscillator (CMF). | On Balance Volume (OBV) with Moving Average (MA) to know market condition is oversold or overbought. When we use two or three technical indicators and in the case of positive divergence or negative divergence, it giving a real good return on investing, and this the ideal condition for low risk high return, try different time frame and find out which is a better pair for you. This is a successes and rewording strategy.

Moving average convergence divergence (MACD) stock trading system

27 This is another technical method, to learn about MACD please visit Learning center. The MACD lines are moving averages, one faster than the other (red or fast line and the white or slow line). When fast line crosses the slow line, it can represent the earliest indication of a possible change in trend. Early indication of the trend change helps you to buy or sell in advance for investing or day trading. Increases in the MACD (Moving Average Convergence Divergence) histogram represents the bullish momentum is strengthening and declines in MACD (Moving Average Convergence Divergence) Histogram represents bearish momentum is strengthening.

All crossover of histogram above or below the center line indicates shorter moving average crossing above or below the longer moving average and that’s a buy or sell signal. A lower peak in the MACD against higher highs called negative divergence and typically it's our Sell signal. A higher peak in the MACD against lower lows called positive divergence and typically it's our Buy signal.

MACD positive divergence is an ideal condition to enter in the market for day trading or investment in the market. However, the When MACD lines cross over each other frequently that represent as they trying to establish the new trend, so its often best practice to wait for a stronger confirmation. When the lines cross over the center line, it indicates that a trend has been established and may be sustained for some time.

This is also a proven stock trading system so many trader giving more weight age on MACD for stock trading in the market.
Breakout Stock investing | day trading

27 Breakouts are some of the most common and interesting techniques to play for day trading or long term investment in the market, but you must be selective in choosing them. Down side (Bearish) Breakout can also be potentially good rewarding choice for stock trading.

Properly identified breakout may offer good return on investment within short time frame like one to seven trading sessions. It's a good choice for trade in the market, and also for long term investment in the market.

For successful stock trading system to get best reword on your investment you can consider share that are breakout with high volume in your portfolio. Before to consider breakout to play, it is very important to know why suddenly change demand (demand increase or supply increase). Here are some Reasons for Breakout
  • Surprise Quarterly result
  • Company declare upside revision for earning expectation
  • Share making new highs often get noticed by media
  • Industry related events
  • News, new products, new management
  • Momentum
Consider to enter on only the best Breakout candidates. Many Breakouts just peak through the new high or point of resistance and head back down.
Potential Entry Points
An additional check point before choosing a Breakout is to make sure that continues its upward (or downward for the bearish play) trend in the next trading session, also check short term moving average is moving toward the breakout direction.

overall market conditions play an important role in determining the significance of a Breakout stock trading. A stock breaking out in an up market that more likely to go upward. A share breaking out in a down market may struggle to go more up but a share that does may explode upward when the down market turns around.
Potential Exit Points
Your exit rule depends on risk tolerance. You may want to consider a trailing stop loss as your exit strategy or you can keep stop loss at some level below then previous days low and move it up with price moves up.

With Breakouts, one of the best exit strategies is a closer pivot point; you can consider 50MA, 100MA, 200MA and also watch for Fibonacci number.
Volume/Price Moves
Only the share choose those breakouts with high volume, I like at least 250% of average volume and that finished the day near the top of the day. Volume is a very important factor to consider Breakout stock trading or investing. This is also a proven stock trading system so many trader love breakout for portfolio investing or stock trading. Some of them taking rest for some days, and going back to test Breakout point before they continue to climb upward | downward. Stop loss: Stop loss is a very important to protect your asset so set a stop loss some level below the Breakout days low.

Peak Plays

27 This is a one of my favorite technique to trade in the market.

Some of the peak plays are short term plays only, so Peak Plays require that you take quick decision and move very quickly getting in and out. Peak play is best for day trading. You can play with peaks itself or the pullback. This is a more risky strategy then other theory but it gives a good return on your investment, only things

Important is keep tight stop loss. Here are some possible reasons for Peaks:
  • Earnings reports or forecasts change
  • Upgrades by broker | financial institution
  • Merger and merger speculation
  • Splits
  • Rumor
If you are quick enough to take right decision and if there are still enough buying interest | pressure then you can ride on the trend.
Potential Entry
If you believe a peak can be sustained for your quick stock trading, consider trying to get in at the open, or you can buy in pullback.
Potential Exit
With the continuation Peak Play you should consider getting in and out the same day - sometimes within an hour, it is best for day trading. Historical data shows that many stocks may start topping and maybe even pulling back soon.
Gap Plays

27 Gaps is a one more good techniques for investment in the market, Majority technical analyst recommend to gaps play, because it is a market tendency to fill up gap within short time period.

Gap Play is another proven stock trading system so many trader love gap for day trading | stock trading. Its little more riskier then other techniques for investing and day trading because usually gap happened due to some strong news. For investing in the market it’s a best choice, only you need to verify with technical indicators.

Potential Gap plays:

To play gaps you need to identify strong resistance or support and market major trend. Once you know trend you can play gaps for day trading. If market trend is up and there is a down side gap, and as soon as it hit support you can enter long because within short time period that come up to fill up gap.

Same way if market trend is down and there is an up gap, in this case when price hit resistance zone you can enter short for stock trading or day trading in the market.

It's an advisable to avoid gap that are in major trend direction because many time that to fill up its taking long time and if you playing for day trading you can loose your money.
Sell the losers and let the winners run

27 How to identify share is loser or winner?
With compare to market movement if price loosing more then its normal fluctuation then we need to evaluate that share again. If the recent news or events has more long-term implication then it's a time to book the loss and picks another for day trading or stock investing. Here some reason to book loss on your investing :
  • Company reported lower sales
  • New tax difficulties due to government policy change
  • New legal problems
  • Any other more costly situations which effect earnings.

Any situation that has a negative Outlook on the longer term picture of earnings or growth can turn a share into a loser. Winners are shares who showing consistent income growth and earnings growth, and company development with new or existing markets on new products or service. For successful day trading | stock trading system to get good reword on your investing it is advisable to consider average up for winner in your portfolio and also you can consider that for day trading in the market.

The share stay winner up to the time it's product stay winner in the market, the day it loose ground, share turn into looser. Winners should be stay winner until the fundaments which make them winners stay growing or the price jump too much then the earnings (check P/E). If the growth of earnings does not increase with the price, that can easily turn into a loser. Losers stock should be sold and forgot until they stabilize and begin to build the fundamental strength to become winners. For successful stock trading system you need to consider to sell loser form your portfolio and also you need to avoid that from day trading in the market.

Check the above chart, that indicating steady income growth and earning growth quarter to quarter and again year to year steady growth. A company who's income and earning growth steady that always stay winner. In above chats you see that in last two quarter income and earning growth little down or near to pick that indicating it's a time to book profit because fundamental like income and earning loosing the ground. Once income and growth start negative move, price can start to loose quickly and turn into looser. In this case for stock trading or investing you can go short.

I shown here many techniques to picks share for stock trading in the market you can check it with RL. Remember there are a risk in investment, may be it not suitable to all. Before to do any trade’s contacts your broker or adviser. To learn more about investment visit another page. On that base develop your own rules and stick with your strategy to trade like professionals, I am sure your next trade is successful with good reword. Visit every day and look for new breakout or penny stock that can save your lot of work!!! Basically penny stock trading system almost same, you can apply all theory for that.


Home for ۩ Day Trading | Breakout Stock trading system | Penny Stock Investing | Market Research

Contact Us | Tell a Friend | Affiliate | Disclaimer | Feedback | Help | Site Map | RSS  RSS

All Rights Reserved © 2000-2006 Flyingstock.com