3SOF

Hi,

I want to share with you one of my favorite strategy : breakaway gap.

Setups :
1.   High < yesterday's low
2.   High volume
3.   Optional but reliable : a support is broken.

Philosophy behind this strategy :
1.   Trade against the crowd. It means I take a trade in the opposite direction of the move.
2.   Corrective movement following a strong rally.
3.   Excellent reward/risk ratio
4.   Gap are excellent to know to plan a trade. Gap is a great resistance/support level.

Money management :
Go to my recent topic.http://www.3stocksonfire.org/trading/index.php?topic=6932.0

Entry price :
1.   Buy entry price : end of the move -> I use MACD-histo and %K above 20. When I have a signal I have a look at my reward/Risk ratio. It must be at least at 3.
2.   Sell entry price : end of pullback. I use gap zone, Fibonacci retracement and volume's indicators.

Example :
CHID...
Close at 2.00
Target at 3.5
Stop-loss at 1.85
Reward/Risk ratio of 9.23...Excellent...
Setups : Buy signal. Not yet. MACD-histogramm is near to turns. I am waiting.

Good trades.

I have forgotten one think : In general your winning trade take less days than losses trades...

So if you want that market has difficulties to reach money management protection rule, take a loss or a little profit...

Here is an recent example : CHE...An another great gap...

For me IMAX shows a perfect "Breakaway gap"..Why ? Low-risk. Reward/ratio of 6.75...

I have bought some shares at 4.60. It is not too late because imax shows a symetrical triangle...

Another rule :
When we have a such great reward/risk ratio, we can adopt a protective strategy by using 3 profit targets. Use natural support-resistance levels to find them

Another rule :
To reduce risk of the primary strategy, wait for an another downtrend after the "breakaway gap". You limit the number of trades but you limit the risk. At each to choose.

Great trades...

Be short on AMZN...