When to Enter the Trade
Using the Master Plan, swing trading opportunities are identified after the market closes. Trades are entered in the morning, usually within the first half hour of trading. When you enter the trade (and the decision rule you use) depends on whether or not the stock has gapped up or down from the previous day’s closing price. According to the Master Plan, a stock is considered to have gapped up when it opens 50 cents or more higher than the previous day’s close; it is considered to have gapped down when it opens 50 cents lower than the previous day’s close. Most frequently, the stock price will open within 50 cents of the previous day’s close, neither gapping up nor gapping down.
• The most common occurrence – the stock opens within 50 cents ($0.50) of the previous day’s close – the order can be placed a few minutes after the market opens.
• Occasionally a stock gaps up 50 cents or more compared to the previous day’s close – the order is placed at least 30 minutes after the market opens.
• Occasionally a stock gaps down 50 cents or more compared to the previous day’s close – the order is placed approximately 5 minutes after the market opens.
• To summarize, if the stock gaps in the same direction as the trade, wait 30 minutes, and if the stock gaps in the opposite direction of the trade, wait 5 minutes.
How to Enter the Trade
As with when to trade, how to enter depends on whether the stock gaps up/down or not. Typically, the stock price doesn’t gap up or down and the entry price is based on the previous day’s prices. When the stock gaps up or own, the entry price is not based on the previous day’s prices, but on the current day’s prices. Whether based on the previous day’s prices or the current day’s prices, the entry rules are the same.
• The most common occurrence – the stock opens within 50 cents ($0.50) of the previous day’s close – buy the stock the moment it trades 6 cents (1/16) above the previous day’s high. This can be accomplished by using a buy stop order. This increases the likelihood that the price is moving in the direction of the bullish (long) trade.
• Occasionally a stock gap up or down 50 cents or more – buy the stock the moment it trades 6 cents above the high of the new day. This would be 30 minutes after the market opens for a gap up or 5 minutes after the market opens for a gap down.
