Technical Analysis | Trading Shares - Highs And Lows

8th Jul '22 by Dicky Mint

8 comments 767 reads

I'm interested in what shares, if any, people buy and sell frequently, buying the lows and selling the highs. Peaks and troughs - some shares seem to move up and down quite consistently - perhaps between reporting dates etc. Which stocks do you consider fit the criteria?

What are your criteria?

Bid offer Spread - presumably small to minimise trading costs.
% gain at which you would religiously take a profit?
1. What is the minimum? To make it worth while
2. When should you take it - avoid being greedy ..

Disclaimer: I know nothing about technical analysis :) As always I am not seeing anything people say as advice etc, just interested in peoples ideas for shares that might provide some opportunity and people should do their own research.

As an example: I recently bought Scottish Mortgage Investment Trust (LON:SMT) at £7.24 and sold them 2 days later at £8.00. After costs I made a decent 10% on the turn (in a tax efficient wrapper).

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doctor dave

8th Jul '22

Gambling. Up. Down. Sideways. Don’t do it. Next time it will be 20% down. You have to be super well-informed to make this kind of trading profitable.

AnonymousUser1822519

Without knowing any technical analysis, you were basically lucky if you didnt have a way to know the technical position.

You bought after a double bottom at 670p (not yet confirmed) where price tends to move upwards shortly after - in long term downtrends the bounce is likely to be shortlived especially early on in the down trend. If the double bottom is confirmed by price breaking on close above 830p, then you may have another trade. However, in bear markets, the success rate of double bottoms is much lower I believe. I tried a few trades long Boohoo (LON:BOO) at 180p a while ago, but quit early as the double bottoms failed numerous times meaning it was going much lower - look at the price now. Boohoo recently formed another double bottom so at these levels, I would have been tempted to trade it long, if I wasnt in something else.

I've been swing trading Parkmead (LON:PMG) recently. It has good swings, of about 20/30+ percent, so even with spreads of 3-4 percent it is still quite profitable. However, sometimes when it seems like a bottom is in place, it turns out not to be, and it breaks lower, so the trick is to take a quick loss. Take even one big loss of total capital and it could be game over if it doesnt recover.

Your risk should be minimum 3:1 per trade i.e risk 5 percent to make 15 percent. I would usually take profits at resistance levels, not necassarily after x amount of profits.

Also 2 days hold is almost day trading. Not worth it for stock trading. Swing trades tend to last longer: several days to a week or several.

These days I trade with both with TA and fundamentals(thanks to Stocko). I used to trade only using TA but it helps a lot knowing that the stock's fundamentals are sound and not about to go bust.

I'd suggest learning some TA and some books on swing trading. More for experienced traders I reckon.

Dicky Mint

9th Jul '22

Yes it definitely feels more like gambling!

Thanks - yes definitely more luck than judgement. I use II as one of my brokers and they offer tech analysis on pretty much all shares with explanations of the indicators / patterns as they occur - but I can't say I understand it at all.

Any easy read books / sites you would recommend? Thanks for your time

Harry Hindsight

TradingView gives you numerous technical strategies.

Stockos charts are very good just use the MACD with two or three moving averages (50/100/200 for trends).

Also study candlesticks - Steve Nison writes well and has a website. The Doji is the king of the signals imo.

Investopedia very good.

I like Michael Taylor's website, shifting shares. He used to write TA articles here in fact, well before I subscribed here. I don't actually subscribe to his online course, but if you register you can get four of his trading books for free. They are definately worth a read. As for TA books, just do search on Amazon plenty there, but one I found useful when I first got interested was "Technical Analysis plain and simple" by Michael Kahn, good for absolute beginners. I sort of gained my knowledge from articles I've read on the internet over the years.

PLS1nve5t

10th Jul '22

Doing the sunday screening and happend across Smiths (LON:SMIN) which I think meets your criteria. It looks to float between 1350 and 1600 quite regularly. FTSE 100 so thin spread but their is the dreaded stamp duty to pay. Its not too far past the bottom of the current cycle.....

Breakout Trader

Hi Dicky,

“Buying low and selling high” is something of a myth in my opinion. Successful (if we believe them) swing traders generally “buy high and sell higher”. The key difference is that you want to buy strength, not buy weakness with the intention of timing the turn - you may do that occasionally, but you’re more likely to fail IMO.

Best books / resources for swing or breakout trading that I have read are:

Trade like a stock market wizard - mark minervini

Think and trade like a champion - mark Minervini

How to make money in stocks - William (bill) O’Neil

Secrets for profiting in bull and bear markets - Stan Weinstein

Kristjan qullamaggie (qullamaggie.com)

Pat Walker - mission winners (some good YouTube videos)

There are others, it you’ll find these guys all follow the same basic principles. They all use stop-losses, and prioritise risk management over profits.

When to sell is a difficult question, there are various different methods but they’ll generally sell at least some of the position into strength particularly if price runs up after the breakout.

Pat Walker uses the daily 8ema as his guide, qullamaggie I think uses the daily 10sma, O’Neil advises selling some after a 20%-25% move... there’s no right or wrong, you have to experiment a bit and find what works for you, and adapt based on market conditions. Minervini was selling after a few days in choppy conditions last year.

I suggest reading a lot though, if you’re looking to trade this way, understand that it is is a skill which is difficult and needs time to learn.

Hope that helps, all the best.

Trading shares - Highs and lows

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Dicky Mint

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