Page 416 - THE MARKET WHISPERER

412 PART 11 - Risk Management

3x3 rule relative to the actual entry point. When a gap of more than 1%
develops, cancel the buy order.

• Earnings reports
Before publication of quarterly earnings reports, we will always sell

our full quantity. As we learned in previous chapters, you need to carefully
check which reports are expected and sell the day before anything major
is to be released. It is common knowledge that the results of these reports
are not known in advance, and the risk to the price is too great.

• Time of purchase
I never enter a swing later than the middle of the week’s last trading

day. We are looking to buy stock with strong chances of reaching its target
already within the first week of trading. If we buy stock at the end of
the last day of the trading week, its chances of reaching the first target
or even moving far from the entry point are far less. Going to sleep over
the weekend with a full quantity of shares that still endanger my trading
account is just not on my agenda.

• Which Stocks are Suited to the 3x3 Method?
Most of the stocks we trade in, with a share price of between $10 to

$80 and volume of over one million shares per day, suit 3x3 trading. Some
do not. Before choosing a stock,you must check that you are not buying
anything too volatile, or lacking volatility (such as MSFT and others that
trade similarly). Volatile stocks will more naturally suit the 4x4 or even the
5x5 method.

Summary

The 3x3 method works well! Using automated buy and sell orders solves
a good deal of the psycho-emotional aspects of money management, and
therefore, coupled with good choices of stocks, should virtually guarantee
success. If you have a limited time only for trading and cannot find suitable
opportunities for active intraday trading, you can at least devote one hour
each week to trading with this method.

The Tradenet investors club is very successful when it applies the 3x3
method. As these lines are being written, average monthly returns over the
past six months have been 8.4%. Is there any good reason not to invest an
hour each week in trading this way?