Then, the best thing to do is set a stop loss at just below the moving average each day.

For example, say you see an uptrending stock and it's pulling back towards it's 50-day moving average. If the MA today for the stock is at 15.00, then look for it to begin to move up from this level, you will enter the trade just above 15.00. Then, I set a stop loss at just below the moving average for that day, so in this case it would probably be something like 14.90. That way if I'm wrong, I'm not out much.

Then, as you are still in the stock, and if it continues to rise, and the 50-day MA is now at 15.25, that trading day I would set my stop loss at 15.15 or something. That way if it breaches the 50-day moving average, I bail out, but still take a profit. I continue this each day, setting the stop loss just below the moving average, or support level for the stock. That way your trigger to sell is most likely just getting stopped out. So initially this helps protect from a major loss, but more importantly it protects your profits each day as the stock slowly climbs.

Then, keep updating your stop loss to just below the 50-day moving average and you guarantee profit if you make it past just a day or two! As you can see, it has yet to pull back to the 50-day moving average, so you would have profited almost 50% in just a few months already. In the worst case scenario, if the stock started to tank on monday, your stop loss would be just under 70. 1st of all, it is highly unlikely it would drop that fast in one day, and second of all, even if it did, you would be stopped out with almost a 15.00 dollar per share gain! That is about 27% for only a couple months.

Here is another one.. if you bought on the pullback in mid-July at around 2.50 this stock never touched your stop loss (50-day moving average) for almost the next year, making you many hundereds of % gains.

If you were not using appropriate stop losses, most people would have sold a week or two later after it breached 3.00 and began to pull back. Granted, I don't blame them because that is a 20% gain. But, their emotions were directing this trade. If you had your stop-loss set just below the 50-day MA, you would not have sold, AND again, even in the worse case scenario, the 50-day MA was still about 10% above your entry, so if it did pull back that far you still made good money. But since it didn't hit your stop, you held on and continued to yield hundred after hundred % returns for a few months.

I hope that helps you to understand the most profitable and safe plays in the market

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Originally posted by mike7131_99:
May I ask what system you are using for the uptick information?

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Price increase at the end of the day - percentage gain from close the day before - with greater day volume than the average volume over the last month. Most any chart will show this.

Criteria

• For the last market close:
• United States Stocks with...
• Bullish MACD Crossover
• 15-day Simple Moving Average of Volume for today is greater than 1000000
• 3-day Simple Moving Average of Close for today is greater than 1
• 50-day Simple Moving Average of Close for today is greater than 50-day Simple Moving Average of Close for 5 days ago
• Daily +DI(14) for today is greater than Daily +DI(14) for 3 days ago
• Daily -DI(14) for today is less than Daily -DI(14) for 3 days ago

If you are a stockcharts.com paid user (if you aren't, I STRONGlY suggest you do for how cheap it is) then you can enter very complex and custom screens. The forumla for this stock screen is as follows:

[type = stock] and [country = us] and [daily sma(15,daily volume) > 1000000] and [daily sma(3,daily close) > 1] and [yesterday's daily macd line(12,26,9) < 0] and [daily macd line(12,26,9) >= daily macd signal(12,26,9)] and [yesterday's daily macd line(12,26,9) < yesterday's daily macd signal(12,26,9)] and [2 days ago daily macd line(12,26,9) < 2 days ago daily macd signal(12,26,9)] and [3 days ago daily macd line(12,26,9) < 3 days ago daily macd signal(12,26,9)] and [3 days ago daily macd hist(12,26,9) < 3 days ago daily macd signal(12,26,9) * 0.25] and [daily sma(50,daily close) > 5 days ago daily sma(50,daily close)] and [daily plus di(14) > 3 days ago daily plus di(14)] and [daily minus di(14) < 3 days ago daily minus di(14)]

Basically, what this scan is looking for are stocks trading above 1.00 and with recent average volume of over 1M shares per day. It then looks at the 50-day moving average to spot a short-term uptrend of 5 days. By using 5 days, this eliminates stocks that could potentially be in an already long-term uptrend. The key to this screen is to find stocks that are turning around. Next, we are looking for a bullish MACD crossover on the day the screen is run. This could be a cross over the signal line, or the 0 line. Finally, I like to find diverging DI signals. If you aren't familiar with the ADX and DI signals, I suggest you briefly look that up to see what it is they are signaling.

When combining all of these factors you typically come up with very few results, sometimes none at all, other times maybe 5. But the key here is it filters out a lot of the BS and gives you a few strong possibilities for a stock that is turning around and where you can make some solid gains in a week to a month. Today (July 20, 2004) this screen has turned up one result, and that is the stock SBL. See the chart below for a detailed explanation:

As you can see, it met all stock screen criteria, but once looking at the chart even more important details can be found. Most importantly, the resistance levels of the 50 and 200-day moving averages. It closed at the high of the day today right at the 50-day MA. If it can breach this level and sustain it, that would be very bullish, and it is well on it's way to moving further upward. Second is the Raff Regression channel, again, it closed right at this level and if it breaches this level it would be very bullish.

The key to this trade would be to wait for comformation of the price reaching above these two key resistance levels, and if so, enter the trade. Once the trade is made, a stop loss should be set just below the 50-day moving average, I would suggest something like 14.00. This would allow for some pullback that could be just a shakeout or minor correction, yet you most likely wouldn't be stopped out too early. This way, worst case scenario, and you buy in at 14.40 and it falls to 14, you escape with only a very minor 2.9% loss. If it was a 1,000 dollar trade, I think you would be happy with getting out losing only 29 dollars plus commissions. This is much better than holding on waiting for it to turn around, losing potentially much more!

If you do not get stopped out in the first day congrats! You are on your way to a profitable swing trade. After the first day, tighten up your stop again, bringing it a bit closer to the 50-day MA. Each day that you remain profitable, adjust your stop-loss upward. NEVER ADJUST YOUR STOP LOSS DOWNWARD! Moving your stop loss down defeats the purpose of the stop, and you will widdle away your profits. If the stock begins to change direction, let it hit your stop, and then you WILL still exit profitable. This is a critical rule. Do not let your emotions play any part in your sell decision, let it fall on your technical points. The minute you begin to let greed or fear take over, you will begin losing.

Sometimes, even with a good screen, and what looks to be a great trade will not always turn out that way. Nothing is 100% Always allow a good half hour at least before entering the trade the next morning. The first half hour of trading is usually chaos and can give you many false signals in either direction. Let things calm down a bit before making an entry decision. Remember, we're not bottom fishing here, we are simply spotting a potential trend and riding the wave. If you try to constantly pick the absolute bottoms and tops, you will fail time and time again. You want to pick the meaty part of the run and ride it, and when the wave collapses you are out, taking your profits with you.

Sometimes though, unusual circumstances will come about where the stock may skyrocket, or climb very quickly and be well above your stop loss set by the moving average. If this is the case, you should move to plan B and set an alternate stop loss. Big moves like these are typically short lived, so a much tighter stop should be selected. So how do you know where to set it? Easy

The shortest possible support/resistance points are the previous day's high and low. If you are daytrading at all, you probably already realize this. So, in the event your stock moves very strongly and is well above your existing stop loss, I suggest then setting your stop just below the previous day's low of the day. Why? Well, day traders, and other short term traders follow this rule, and if the stock does fall below yesterday's low, it will trigger dozens, if not hundreds of these trader's stop losses, causing a sharp sell off So by setting your stop along with them (or slightly below) you won't be left holding the bag when everyone's stop losses get triggered. The reason this level acts as support is based on the same thing, daytraders who have been watching the stock look at this and know that there are a lot of stops set at this level, so if the stock during the trading session does not fall below yesterday's low, if they missed the boat yesterday they will buy in just above this level, thus creating the support.

So, to summarize, I don't like to manually exit a trade when I feel it's topped out, when I do that, I tend to get greedy and end up losing out, or sometimes I get shaken out of a small pullback selling too early. That is why I almost always let me stop loss dictate where I sell. If the price hits this level, chances are it was the right decision, and I didn't have to sit and make a decision based on my emotions.

Hope that helps!

I am trying my best to better my knowledge in getting a better understanding of the markets from a techical side and sorry if some of the questions I asked or some of the stuff I say may seem off the wall sometimes. I feel confident that as time goes on I will fully understand the ins and outs of trading.

That isn't to say it can't break down the resistance, but you shouldn't buy until it comfirms that.

I bought in yesterday at 14.25 and put a stop in at 14.00. Today it breached this mark and I was stopped out, so I ended up losing just under 2%. Granted, the stock recovered very well late today and I could have actually been in the green again, but that's ok. The stops are just protective measures so you don't sit there and hold onto the stock watching it, waiting, and hoping it turns around. If it would have kept falling, I would be very glad I only escaped with a 2% loss.

So it is worthwhile to keep SBL on your watchlist, because with the two strong resistance points it is trading at right now, with some solid volume and a nice push over this mark would signal the reversal. Remember, the screens pick out potential reversals, and they don't always reverse the next day after showing up on your screen

The other added bonus with the next level of service is the number of charts you can "save" in your account. I personally have well over 100 stocks I keep in various folders, and at a glance, I can look at small thumbnail charts 10+ at a time on one screen to look for good plays. This is a great feature. You can have 100 with the basic, and 500 with the extra.

Along those lines, with the extra you can create annotated charts that update automatically over time, you get up to 40 different overlays and indicators to add to your charts, and you get to go back 2 years.