Page 316 - THE MARKET WHISPERER

312 PART 10 - Winning Trades

you feel pressured? Try to imagine where you would feel pressured: that is
the buy point! If you also need visual assistance, you can use the Fibonacci
lines for entry at pullback with a range of 30% to 60% from the peak.

Once the pullback is established, the stock shows a classic reversal in
five-minute candles, and indicates its willingness to bounce. In the trading
room, I announced an entry at $88 [1]. We entered, sold half the quantity
at [2], and another quarter at the peak [3], totaling some $1.40 above the
entry point. We left the last quarter until the end of the day, and one-eighth
was transferred to the next day when, to our great joy, the stock continued
trending up.

What would have happened if I had entered at the wrong point and
suffered a loss of 20 to 30 cents? The answer is simple: I would not have
exited. I would wait for the reversal in five-minute candles even at the
lower price, and pray for the stock to rise. Why? Because the stock rose
several percent in just a few minutes. Without doubt, something positive is
happening there: after all, it’s a strong stock. The fact that I bought at $88
[1] says nothing. I could have been wrong. The stock might have dropped
several tens of cents and only then begun to trend up. No one can promise
that my entry point is the correct one, even if I were buying according to
the best of rules. But the formation of the five-minute candles led me to
believe that chances were good for this being the best entry point. You
need to keep in mind that the stock is strong, and therefore in most cases,
it will end up, even if it temporarily drops below the buy point.

In some cases, however, the price will not recover and I will lose
money. When that happens, it is definitely not pleasant, but it is part of the
statistics which overall work in our favor. It pays to absorb a few losses if
more frequently we generate handsome profits. It is better to occasionally
suffer and frequently profit. Remember that intraday changes of direction,
even if based on clear reversals in five-minute candles as you see in the
stock chart, are significant but do not necessarily indicate the correct entry
point. It is enough for one large seller to want to drop a large quantity at
the click of one button to change the chart’s ideal status. My suggestion is
simple: believe in the stock, even if it continues to drop after you bought
it. Remember that when that happens, it has still done “nothing wrong.”
That’s what stocks do. The stock does not care whether you have erred in
estimating the entry point and bought a little too high. You must keep in
mind that strong stocks reverse back to highs in most cases. Period.