Trading plan is a very important aspect when you pick a stock. You must do your homework before you go to the stock market. My Blog provide you a list of stocks, which I filtered from all the stocks in KLSE everyday. I hope that it can help you to investigate further on its chart pattern and fundamental.
What is a trading plan for buying a stock?
After choosing a stock that you have predicted it is in the up trend direction, you need to start your planning. What are the factors you need to consider?
1. You need to find out where is the resistance and the support level
2. You need to decide where is the best entry price
3. You need to decide where is the cut loss price
4. You must be disciplined, follow your trading plan
In my Blog, I usually state the resistance and the support level for each stock. So you can save the trouble to find out the resistance and the support level if you follow my stock pick. So where is the best entry price? As a chartist, we normally look for the stock to break out of the trend line or the resistance before we consider to buy. Don’t ever place your buy order at the resistance or below the resistance 2-3 bits. The resistance is point where there are many sellers who bought at that level some time ago (a few months to a few years) and most of them are waiting to sell their stocks at this price. So we have to wait until it breaks the resistance and sustain above it. This is to say that there must be an in flow of new capitals in order to replace the sellers. Otherwise it will fail to break the resistance.
Technical analysis sometime will not work, so you need to decide where is your cut loss point after you had bought a stock. The best way is to determine the support level. If a stock doesn’t break down the support level, that means the stock still has a chance to go higher after the profit taking and consolidate. Please check my “higher low” post a few days ago. However you may cut loss first if it really goes below the support level for a few bits. Some people decide the cut loss points like –5% to -8% below the buying price. It depends on individual. There are many other advance methods to decide the entry price and the cut loss point which I will cover later. I will touch on why cut loss is so important on a different post.
The last and very important aspect is the “Discipline”. Plan your trade, trade to your plan. Do not change your plan after you had established the plan. This is the step where most people fail because of Discipline. I will try to touch on selling plan on a different post.
Take Note: I had received some comments on the last 2 posts. Please check them and feel free to sent me a comment under each post. I will try my best to answer you.
