How to use the 4% breakout scan to make money | stockbee


How to use the 4% breakout scan to make money

OME is an example of 4% breakout that made 25% move in last 10  days.

If  you want to make money swing trading and find stocks like OME learn about a simple range expansion scan that can find you hundreds of such moves in a year.

4% breakout is a range expansion scan which works best on small and mid caps and lower priced stocks. It allows you to get in to a 3 to 5 days momentum burst kind of move of 8% to 20%
What is 4% breakout scan
c/c1>=1.04 and v>v1 and v>=100000
The scan gives you stock up 4% with 100k volume and with volume surge today.
You have to run it on US Common Stocks in Telechart
Select best setups from the scan
The scan gives you many candidates but you must only select the ones where there was orderly pullback or consolidation before the breakout day.
Stock should not be up 3 days in a row prior to breakout day
Stock should have narrow range day prior to breakout
Stock should have a period of range contraction prior to breakout day
Stock should have orderly first up leg prior to breakout
All in all the quality of setup is important for selecting the best sock to enter.

When should you run the scan
Scan should be run from market opening onwards and once a good setup shows up should be entered as soon as you identify it. That will help you capture rest of the days move. You can also use it for end of the day scanning and enter next day. 
How to manage the trade
The only reason to buy a 4% breakout is that we expect immediate follow through on the move.
That logically makes our stop the low of entry day.

Once you are in the trade either the stock will follow through or fail.
If it fails your stop will take you out.
If it follows though but the follow through is weak then by 3rd day you can be out.
If the stock follows through then you must start planning your exit at right time and also ensure once you have profit you do not give it back.

As soon as stock goes 4 to 5% above entry you should move stop to break even. This should be done intraday itself. Our first objective is to at least not lose money.
Once stock is up 3 to 10 days in a row exit in to strength again it is best to do this intraday as many big gains can fade by end of the day.

In this case of OME once stock had profit the position was sold in to strength and 25% was retained with tight stops yesterday.
How can you use this scan to make money
In order to successfully trade you must setup the scan in software you use and develop guidelines to manage the entire trade from entry to exit.

In order to trade this setup you must have the ability to identify good setup immediately as they start showing up in scan. 
One easy way to develop that skill is to build your own examples of past winners and failures from 4% breakout.

Go  go through and document at least 100 good examples of this setup from past one year and study them carefully , so that you know exactly what a good setup looks like. Make a book of ideal setups

If you are serious about making money swing trading then develop setups like these and trade them. Stop wasting your money or time chasing tips from others or listening to CNBC , develop an expertise in swing trading. 

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