Pivot Prices & Trade Timing

The team at High Chart Patterns, which offers stock newsletters, wrote in with some tips on breakout / breakdown trading. Also be sure to read their tips on stock trading psychology.

"There are two parts that have to come together before a trade is entered. The first one is simply to have a certain pivot price that seems to represent an important point — be it a new high or a break of an established base.

Here are three examples of breakouts whose charts we have saved over the years:

 
The second part is whether to enter a position once the stock hits your particular entry number. Things are never as easy as they seem in this business and you must take an active role in deciding whether to enter the position or not. As a stock is hitting your entry price you must decide whether these three conditions are met:

a) is the trend of the market on your side?

b) is the stock printing above average volume?

c) is the intraday pattern strong showing determined strength (or weakness, if it is a short position) in a tight and not sloppy manner?

In our experience disciplined traders who patiently wait for their selected stocks to hit their entry prices, and then confirm that all conditions are met before entering the position, enjoy the most consistent returns. Also, it is important to note that this method of trading remarkably reduces the incredible stress that some traders feel as you are only entering top quality patterns with risk-defined stops."