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Timeframes Dictate Trading Plans

Last week at TheStockBandit.com, we caught some quick moves in a few stocks which were provided as day trading candidates. Each of them had earnings which were about to be released, which we won’t hold into, but yet their chart patterns [1] were still very high-quality. So instead of looking for, say, a 15% move in a week or two by swing trading [2], we opted for the quick-hit style of a few percent. (It’s called The Stock BANDIT for a reason!)

We caught good initial moves for day trades in 3 stocks (2 longs and 1 short sale [3]), taking the quick pops and then stepping aside. By adding up 2-3% at a time, we booked some solid gains by keeping timeframes abbreviated in these stocks which had earnings reports on the way but still had good chart setups.

I trade based on the charts, but I also incorporate the approach that each individual stock should be traded in a unique way. By evaluating not only the pattern itself, but also the stock’s personality and any scheduled news, an appropriate trading plan can be formulated which raises the odds of success (profitability).

Stocks which have already reported earnings should be given more time and room to move since there is no scheduled company-specific news to conflict with the trade.

On the contrary, a stock with earnings due out in 2 days should be kept on a pretty tight leash and not trusted very far, since the motivations of traders involved in the stock may change abruptly as the earnings release approaches. Taking the quick initial move in such stocks will still allow you to play the high-quality setups without having to take on additional (and unnecessary) risk with the potential landmine of an earnings report gap.

There will always be some news flowing into the market, but by staying aware of the scheduled news (like tomorrow’s FOMC announcement on interest rates), you can determine the right trading plan for the stocks on your radar.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com [4]

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]