First thanks to Allan at Traders Talk for this blog idea. I think most of the readers at IBC are traders rather than investors and there is a big difference. For a trader to succeed you must have discipline. That means you have to have a strategy and rules. In this post we’ll talk about both.
The 60 minute charts below for RUT & BKX show a great strategy and an easy way to implement rules. In both of these the chartist has identified boxes (channels/ ranges) the indexes are moving in. These channels provide a strategy long or short and also a way to implement stop loss rules that minimize downside risk (stops noted on charts) .
I didn’t note the targets in the charts: -
If short: the target would be the bottom of the respective boxes.
If Long: you would play the breakout with a trailing stop at your buy point for starters. You would move that trailing stop up as the breakout continues to lock in profits as the move starts to fail