Make Money Investing in Stocks – 3

This is article #3 in the series about a low-risk stock trading system. It describes the Breakout Indicator for use with this system. (Note: This information is meant only for experienced stock traders or investors.)

Warning – you must take sole responsibility for any losses you suffer in the stock market.

The breakout indicator tells you when to take a position in the stock market. It does this by determining when the price of the stock you have been watching has risen above the current week’s breakout level. Thus, the indicator accomplishes two very important functions. It determines the current breakout level for a particular stock and it signals when the daily closing price for that stock has risen above this breakout level.

Looking at this breakout indicator in another way, it both selects a stock to purchase (by signaling a price breakout) and it determines when to make this purchase (immediately after the price breakout). Thus, you may be watching several stocks for potential investment, but you will only make a purchase when the indicator signals a price breakout for a particular stock.

Calculating the breakout level — This level for a particular stock is calculated after close of trading for the past week. It applies to the upcoming trading week. It is the sum of two values. One value is based on the trading range of that stock for the last four weeks. The other value is the average weekly price rise expected if this stock enters a bull market. The stock investor, using the guidelines provided by the stock trading method, determines this value.

Using the breakout spreadsheet — The price breakout indicator normally would be set up on a spreadsheet. This way most of the values can be calculated automatically, once you have inserted the proper formulas and their factors. (Note: I am reserving the disclosure of the formulas and their factors for a later article.)

DISCLAIMER — Stock trading is not appropriate for everyone. There is a substantial risk of loss associated with trading the stock market. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using this methodology or system or the information in this article will generate profits or ensure freedom from losses.