1-2-3 Bounce strategy - Income signal

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. 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.

Best way to measure market pullbacks ...Income signal

Income signal
One of my favorite technical analysis strategies and one I often recommend traders start off with is the 4×4 strategy. Works well for high volume stocks and index futures. 

4x4 strategy does not use any indicators. The 4 week high or low price works well to identify markets that are trending . Finding trend is important. 
Make sure last trading day price is highest of 4 weeks or 20 trading day is highest price.

for short 20 day lowest. (upside down) 

After reaching 20 day highest price stock pull back 3 consecutive days when ever day closes higher than previous day (trend starts from here) ( mostly 4th or 5th day) then next day is entry point, then trending resume.

(lowest risk entry point opportunities occur when main trend and minor trend intersects) 

Some traders get confused because they see the market made a 20 day price high a few days earlier; you have to look at the 20 day high in hindsight after it made the 4 consecutive lower closes, otherwise the 20 day high is irrelevant.

Exit strategy (income signal)

Swing trade exit
The first step after you enter the market is to place your stop loss 2 ticks below the low of the entry bar.

The second step is to leave the market work for 5 trading days. Do not move your stop loss level or set any profit targets for the initial week of the trade. Avoid the Urge To Do Anything For 1 Week Or 5 Trading Days. You can apply this method to day trading, switch each trading day for each trading bar. 

After the position has been entered and had 5 trading days to work, we start counting back 10 day lows each trading day. When the market makes a 10 day low, we will exit the market. Watch how this method keeps you in a trending market.

The 10 Day Breakout Exit Strategy Is Designed To Keep You in A Strong Market That Has Continued Momentum

If the stock didn’t come down so much, the method would have kept me in a bit longer. This happens often with Stocks or other markets that are trending very strongly and retrace only for a few days at a time. I once thought about a short term trade that kept in for 6 months because the market didn’t want to retrace far enough to trigger my stop. This exit strategy works well with breakouts and other entry methods that are known to produce volatility. One of the first technical analysis basics is to pick stocks and other markets that have good liquidity and volatility. Always Place Your Stop Loss Level at The Time You Place Your Order Remember once you are filled, you do not rely on this strategy for the first 5 days or the first week of trading. You rely on your initial stop loss level at this time. Many times beginners get confused about when they should start looking for the 10 day low. You should start on the 6th day after you enter your trade. A Strong Trending Market Doesn’t Pull Back Much Notice how the strong trend keeps the stock from making a 10 day trading low. I picked this example specifically because I wanted to demonstrate how a very short term trade can turn into a long term trade. If this happens that’s great, because it will make you follow the first principle of profitable trading, cut your losers and ride your winners. That’s it for today’s tutorial, during the next few weeks I will go over a few more exit strategies including how and when to take partial exits.

Rubber Band Reversal

Step 1  
Identify range bound markets on Daily or 4 Hour Charts 
A ranging market is simple to identify. We are looking for clearly defined sideways movement  that is sustained with several tops and bottoms.

Used a 20 and 50 EMA to show how moving averages can also  signal a ranging market as they quickly begin to flatten and intertwine with one another. This is,  of course, a lagging indicator but for those of you who like indicator confirmations, moving  averages are an easy way to confirm a ranging market. 

Step 2: 

Identify an Over Extension within a Dead Market 

More often than not, extended steep moves will pull back to settle toward reasonable prices, but  this is even more true when the market is in a defined range. When it begins to accelerate and  get overbought or oversold we are very likely to see it “snap back” like a rubber band once the it  runs out of orders to fulfill. 

As always, I like to use multiple time frames to get a complete, accurate view of the market, so  once we have a ranging 4 hour or Daily market condition, we’ll zoom into a 60 minute chart to  find an over­ extended point within the market.  

On the 60 minute chart, we’ll add a Bollinger Band (standard settings) and RSI (standard).  The Bollinger Bands and RSI give us a double confirmation to find over­extended conditions. 

Bollinger Bands are a great indicator for this because they shrink down and quickly define a range which, in turn, makes it obvious when the market is stretching out of that range. When you combine the defined ranges with stretched Bollinger Bands, you get a pretty good idea of when price might make a turn around. But we also like to use the RSI to make sure that price is clearly overbought or oversold. 

**Please Note: The RSI is NOT an entry signal. It simply helps our patience and discipline as  we are forced to confirm an overbought or oversold condition before going to the next step.  

The Bollinger Band and RSI are what allows us to be certain that the market has stretched like a Rubber Band and is ready for a potential snap back in the opposite direction. Now we know that the market is in position for our Rubber Band Reversal, but we do not have the ability to enter the trade yet. 

This is where a LOT of traders get tripped up. The see the RSI shoot over 65 or 70 and they are too trigger happy they just begin shorting the market. The problem is that more often than not, when the market hits 65 or 70 it is still in a momentum phase and we simply don’t know how long that momentum will last. We do not know how far the rubber band is going to stretch. We wait for the price to pierce the upper Bollinger band and simultaneously, we want RSI levels to be above 65 levels. After both conditions are met (Bollinger Band pierced and RSI overbought /oversold) we can go to Step 3. 

Step 3: Find an Entry  

To find a high probability entry, we look for a unique combination I have used for a long time. The combination is a 15 Minute Reversal Candlestick (pin bar, inside bar, engulfing, etc.) at a whole number. Whole numbers are important because of their psychological value. 

Step 4: Execution, Stop Loss and Take Profit 

Once the entry is made, we can place the Stop Loss a few ticks below the entry candle or previous candle (whichever has a higher high) and we can place our Take Profit at the mid­band 

of the Bollinger Bands.