Lesson 4 – Entry Rules

/Lesson 4 – Entry Rules
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In my experience buying a “Breakout” brings about the best and safest method of entering a stock. Buying breakouts simply means buying a new high price after a period on price consolidation. At very least if you buy breakouts you are at least buying a stock that is rising in price at that time. The trick here is to have a clear idea of the resistance required to put the odds in your favour of a successful breakout.

Never pre-empt the breakout

Pre-empting the breakout is a two edged sword, great when it works and costly when it fails. The main issue when attempting to pre-empt the breakout is that often when the stock does not breakout the volume completely dries up and if you have a decent parcel it can be very difficult getting out. If you do pre-empt the breakout and the stock does break, then it can be very profitable and stress free.

Check dividend dates

At some stage you will have a stop loss placed and a dividend will be declared, causing the price to fall to or below your stop loss level. To avoid being stopped out of a good dividend paying company unnecessarily you may need to adjust your stop by the amount of the dividend.