As of 07/23/2024   Indus: 40,358 -57.35 -0.1%     Trans: 15,656 -244.42 -1.5%     Utils: 952 -5.51 -0.6%     Nasdaq: 17,997 -10.22 -0.1%     S&P 500: 5,556 -8.67 -0.2% YTD  +7.1%   -1.5%    +8.0%    +19.9%    +16.5% Overview: 07/12/2024     41,500 or 40,000 by 08/01/2024   16,500 or 15,600 by 08/01/2024   1,000 or 910 by 08/01/2024   19,200 or 17,800 by 08/01/2024   5,750 or 5,500 by 08/01/2024
 As of 07/23/2024   Indus: 40,358 -57.35 -0.1%     Trans: 15,656 -244.42 -1.5%     Utils: 952 -5.51 -0.6%     Nasdaq: 17,997 -10.22 -0.1%     S&P 500: 5,556 -8.67 -0.2% YTD  +7.1%   -1.5%    +8.0%    +19.9%    +16.5% Overview: 07/12/2024     41,500 or 40,000 by 08/01/2024   16,500 or 15,600 by 08/01/2024   1,000 or 910 by 08/01/2024   19,200 or 17,800 by 08/01/2024   5,750 or 5,500 by 08/01/2024

# Bulkowski's Trading Techniques Quiz

## Trading Techniques Entry: Summary

This article discusses trading entry and exit techniques such as bottom fishing and momentum trading for stocks or almost any type of security.

\$ \$ \$

My book, Swing and Day Trading, pictured on the left, has a section starting on page 158 that discusses smiles and frowns, the technique discussed in this article.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

\$ \$ \$

## Trading Techniques Entry: Bottom Fishing and Momentum Trading

Here's a quiz based on the figure to the right.

Imagine that you are trading a stock shown by the curved line in the figure. A and B are at the same price....

Question: Would you rather buy at A or B? Why?

Answer: At A, price is still dropping and it continues to drop after A. Of course, at A, we don't know that price will move lower, but it's a good bet because a trend in motion tends to remain in motion. Buying at A is what happens when you try bottom fishing -- buying as price drops, expecting a reversal after price bounces off the bottom.

Buying at point A is common in bear markets when traders and investors take positions after guessing that the market has finally bottomed and is either reversing or will do so soon. It's a recipe for disaster when the stock continues lower. Often, investors will throw in the towel and sell just days or a few weeks before the stock bottoms. They sell when they should be buying.

Now look at point B. Price is moving up. You missed the bottom, of course, but the sky is the limit on the upside. Buying at B is the higher reward, lower risk entry. It's a momentum play: Buy high and sell higher.

Point B is my preferred entry location.

Go back and look at your trades and determine if you are buying at A or B. If it's hard to tell, then switch to the higher time scale and use a LINE chart instead of candlesticks or price bars. That may help show the trend.

## Trading Techniques Exit: The Sell Side

You own the stock pictured in the chart to the right. Both C and D are at the same price.

Question: Would you rather sell at C or D? Why?

Answer: Price is moving up at C. Why sell if price is rising? Any delay will mean more profit. Often, point C represents the type of exits I take. I think price is going to drop so I exit only to find that price continues to rise after a short retrace.

At D, price has already peaked and is now tumbling. It's time to exit.

If you wait until D to sell, then every delay means a larger loss or less profit. Price drops faster than it rises. I proved that, so it's not idle speculation. If you wait to sell at D and don't get out quickly, you can get whacked. Nevertheless, point D represents my preferred exit.

## Trading Techniques: That's A Wrap

Since the buy points A and B and sell points C and D are at the same price, it doesn't matter which you buy and sell at. However, the price trend and delays can mean increased profit or larger losses. Decide which setup is best for you before you trade.

-- Thomas Bulkowski

## See Also

Support this site! Clicking any of the books (below) takes you to Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."

 My Stock Market Books Invest for Two-Comma Wealth Chart Patterns: After the Buy Encyclopedia of Chart Pattern, 3rd Edition Fundamental Analysis and Position Trading Getting Started in Chart Patterns, 2nd Edition Swing and Day Trading Trading Basics My Novels Bumper's Story Foresight Head's Law Remember Me

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