A Position Trader-A real trade

Let’s take a look at an example of how this strategy works. The chart above is a five-minute chart of Mastercard [MA].

It looks like we have all four guidelines present for the mid-day setup. During this time the stock was trading higher than the previous day’s closing price, and it was also trading above its opening price. During the mid-day time period the stock was tending sideways at or near the day’s high and it had been doing so for more than 1 ½ hours. Now that we have the first four guidelines setup this stock goes on our list and we wait for the late-day time period to begin at or around 2:15 p.m.

Around 2:15 p.m. as soon as our stock breakouts of its sideways channel we place a buy order. We buy the stock when it trades one tick above the sideway intraday high prices. A tick is simply a price unit that the stock trades in. For example, if you were to look at a NASDAQ Level II screen and you saw that the inside ask or best asking price that you could buy the stock was $94.00 and the next higher price above that was $94.02.

We also have all three guidelines present for the late-day breakout. During the mid-day time period as the stock was consolidating it reached a high of $94.60, so once the late-day time period begins and the stock trades above this price by one tick or 0.02 cents (the stock trades in 0.02 cent increments) then you would enter the trade. A stop-loss could be placed just below the low price of the mid-day sideways price base which reached a low of $93.95. Lastly, we’ll exit the trade once prices pull back. This will be a judgment call as to how much you are willing to let prices pullback before you exit the trade. The main thing to remember is to never let a wining trade turn into a losing trade. Meaning if you had entered this trade and were profitable right from the start as the stock rallied higher and you noted a pullback, don’t wait too long to exit the trade that all the earlier profits are given back as the stock retraces. Exiting at breakeven is much better than exiting at a loss.