Our trading strategy picks 5 stocks to enter long and 5 stocks to sell short on a specific day. How should we get prepared before the stock market’s open in order to buy and sell the securities in a timely manner? For instance, according to the Three Line Price Break trading system there should be confirmation with a new daily high for long entries or a new daily low for short ones before actually making the trade. This is how I got prepared on Friday when I was supposed to trade long Williams-Sonoma and Concur Technologies stocks, while at the same time the system advised to sell short 4 other stocks.
We will need to create 2 watch lists. One list would be for long trades and one for short ones. As I am supposed to be monitoring the market for a new high regarding the stocks I am going to invest money in, a quick glance at the “Long” list showing daily losses for the specific stocks is enough to not even bother with those stocks. Respectively, if the stocks included in the “Short” list are gainers, I don’t need to check out their intraday charts.
Friday’s short picks were all gainers. No entry.
Should the situation reverses, I often find myself checking out their charts from time to time during the day, in case they print new highs or new lows. Yet, there is an even easier option and it’s called “Alerts”.
Placing alerts for new highs/lows
The majority of trading software allows traders to place alerts at certain prices for each stock they are interested in. For instance, Williams-Sonoma stock (WSM) printed a new high in the first half hour of regular trading, while Concur Technologies shares (CNQR) managed the same in the afternoon around 14:00. Placing alerts at both stock charts allowed adopters of the 3 Line Price Break strategy to enter the market at the most crucial point.
If you developed a stock trading strategy that considers entry signals’ confirmation necessary, you may need to get prepared before the market’s open in order to trade more efficiently. Otherwise you are likely to miss an entry point or even worse to trade at a much higher or lower price than expected. And that would most probably have a negative effect to the system’s profitability.