1. Find Stocks that are trading above 50 day high (point 1)
2. Monitor Stocks and wait for a pullback down (point 2)
3. Stock must rally within 15 trading days and come close to matching the high price (point 3)
4. Sell 2 ticks below (point 2)
5. Place protective stop (buy stop) 2 ticks above (point 1)
6. Profit target is 4 times your risk level
ANOTHER EXAMPLE
You can see the entire pattern from beginning to end. Make sure to place your stop loss or buy stop in this case and your profit target order. I think this will provide you with a good idea of how to locate and trade the 1-2-3 bounce strategy. I tend to utilize this strategy with low volatility stocks.
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I find that since markets drop so much faster than they rise, I can use the lack of volatility to make tighter stop loss levels. Remember protection of your capital should be your first priority when learning new stock swing trading strategies.
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