Mechanics of Buy Zone Trades
Posted: Mon Dec 17, 2007 2:26 am
Okay, I'm interested in using the Buy Zone to make AAPL juice. I got the simple concept--long when it moves into the long zone, short when it moves into the short zone. Take a profit when it stalls, unless you have a cushion to wait for more. Use statistics to determine the typical price target (seems to be $0.50 in AAPL). I'm all good there. The principle is easy.
What about a stop point? This method is too quick for actual stop orders, so when do you cut off a loser? if it retraces back to the open? If you buy at the first line in the buy zone, should you give it the whole $0.20 until you get a signal into the short zone, and then just reverse? Basically, enter and hold until you get a profit or have to reverse and take the opposite signal? Or do you bail if you get 1 tick below the buy zone? Something else? While the principle is simple, the execution can make or break the expectancy.
Also, how would you execute--market orders or limit orders? Say the open is 40.50. Price moves to 40.60--go long limit placed at 40.70? A limit at 40.60 might not get filled if things are moving, but you could easily get 20 cents or more of slippage with a market order...
Any other explanation of the mechanics of the trade is appreciated.
What about a stop point? This method is too quick for actual stop orders, so when do you cut off a loser? if it retraces back to the open? If you buy at the first line in the buy zone, should you give it the whole $0.20 until you get a signal into the short zone, and then just reverse? Basically, enter and hold until you get a profit or have to reverse and take the opposite signal? Or do you bail if you get 1 tick below the buy zone? Something else? While the principle is simple, the execution can make or break the expectancy.
Also, how would you execute--market orders or limit orders? Say the open is 40.50. Price moves to 40.60--go long limit placed at 40.70? A limit at 40.60 might not get filled if things are moving, but you could easily get 20 cents or more of slippage with a market order...
Any other explanation of the mechanics of the trade is appreciated.