Buy Signals Sell Signals: Strategic Stock Market Entries and Exits pdfdrive com

Remember: Your buy and sell signals are only one third of your trading. You
must have the discipline to take your signals when they are triggered, and risk a

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small amount of your total trading capital on any single trade. No trading system
will be profitable if it is not traded with discipline and the right position size and
risk management.
- In range bound markets buy signals are near support, and sell signals are at
resistance until a range bound breakout changes the chart pattern into a new
trend.
- During uptrends, trading signals that will work are buying pullbacks,
momentum signals, and breakouts.
- Trend trading buy signals can be a breakout to a new high over a set number of
days or weeks.
- Buying gap ups in price can work during Bull Markets with the low of the day
as a stop loss.
- Buying a dip can be a signal based on a pullback to a rising short-term moving
average like the 21 day or 50-day.
- Momentum signals can be a bullish candlestick over the previous day’s high or
a gap up that holds the low of day as support over the next few days of trading.
- Signals that work in downtrends are selling short into resistance at the previous
day’s high price, selling into rallies back to a key declining moving average like
the 5-day exponential moving average, or the 200-day simple moving average.
- During bear markets, sometimes selling into declining price weakness when a
key technical support level is lost, like the 30 RSI on a daily chart, works
because in many markets low prices just get lower.

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Additional dynamics to consider
“I think investment psychology is by far the most important element, followed by
risk control, with the least important consideration being the question of where
you buy and sell.” – Tom Basso

This may seem like a strange quote to put in a book that is about when to buy
and when to sell, but it is crucial to understand all of the elements that go into
successful trading. There is much more to consider than having a good buy and
sell system.
The key elements that should partner with your buy and sell signals are position
sizing and your risk management principles. You must have an equity curve that
you can survive. Most of the traders that don’t make it quit because they can’t
overcome the emotional and financial pain of losing money.
Here are some of the other dynamics that you must navigate to effectively
execute your entry and exit signals and achieve profitability:
- Are you able to take the signal you were planning to take when it is triggered?
- Are you able to cut your loss when your stop is initially hit?
- Can you control your position size on your entry, and not trade too big when
emotions get the best of you?
- Can you resist the desire to add to a losing trade because it looks like a better
value in price while it is going against you?
- You must be able to limit your risk exposure to your planned limit and not keep
adding positions or leverage when you have reached your limit.

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- What is the frequency of your trade signals?
- Are you trading enough markets or stocks to have enough diversity for ample
trade opportunities and trends?
- What is the maximum drawdown you are willing to take?
- What are your targeted annual returns?
- What is the warning sign that something is wrong with your trading system?
- How many commissions will you incur monthly and annually with your
system?
- Is their liquidity risk in your market?
- How much screen time do you need to execute your trades?
- How will you know that your trading methodology is not for you?