Page 304 - THE MARKET WHISPERER

300 PART 10 - Winning Trades

How and When to Click that
Button

The correct entry price is one cent above the line of resistance, i.e. the
moment you see that the first trade goes through above the breakout
formation.

Stocks tend to breakout fast, and you need to remember that you are
not the only one waiting for the breakout. At the breakout point, you will
be competing with other traders who will also try to buy.

You can use two kinds of orders:
• If you use the LIMIT order, limiting to 3 or 4 cents above breakout price,

there is a fair chance you will not get your shares, or perhaps only a
much smaller quantity than you had hoped for. For stocks with low
volume, use only the limit order.
• If you use the MARKET order, there is a far higher chance of successfully
entering the trade. The risk is that the MARKET order carries a “buy at
any price” condition, and you may be buying at higher than you intended
to pay. This is a possible, though very rare, scenario with stocks having
high volumes.
In most cases, you will get better results with the limit order.
Do not expect at this point to understand what you have just read.
Practical experience will make it all make sense.

Buying Before Breakout

As we have learned, the correct technical entry point is one cent above
resistance, but in many cases we try to buy the stock before the breakout.
This is a point in time where, in our assessment, the chance of breakout is
good.

How do we define good chances? Generally, greater than 80% is
considered a good chance.

Why not wait until the first trade above the line of resistance, and only
then buy? For two reasons: to decrease competition with other traders
after breakout, and the possibility of improving our risk/reward ratio
because the purchase price is lower.