Tuesday, December 29, 2009

Trend-Following Strategy

Strategy for capitalizing on a major stock uptrend:

Screening
  • Find a serious uptrend starting in the last 3-6 months, supported by high volume
  • The increase must be sustained or must be explained by a good reason; preferably new product or service coming in from below
  • Stock price between 10 and 50
Activity
  • Find a good entry and exit point
  • Use tight Money Mgmt; Cut short losses and let profits run
  • Use contingent orders to sell on downturns

With this activity, it then comes down to a question of good screening approaches for trending stocks.

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