Last Updated on
Look, I get it.
You’re used to hearing the age-old trading advice:
“Buy low and sell high”.
That’s what everyone and anyone is preaching to you about.
But what if I tell you that you can also buy high and seller high? Would you be interested to know more?
Then tune in to today’s episode to understand my secret technique of buying high and selling higher.
Here’s what you’ll learn:
- This common mistake you must avoid when you buy high and sell higher (most traders fall for this trap)
- 3 little-known techniques to buy high and sell higher nobody tells you
So tune in to today’s episode now…
Hey, Hey, what’s up my friend?
In today’s episode, I want to talk about how to buy high and sell higher.
Many traders know they need to buy low, sell high.
But that’s not the only way to trade because you can also buy high and sell higher.
The best stock traders also buy high and sell higher.
First, let’s talk about what not to do.
Don’t make this mistake when you buy high and sell higher
When you’re trying to buy high and sell higher, you don’t want to be chasing the markets.
There’s a difference between buying high and selling higher and chasing the markets.
When you’re chasing the markets, the price usually has already made a huge explosive move, where there are multiple green candles in a row and it’s so bullish with huge momentum.
It looks like it’s going to the moon.
Well, that’s where you don’t want to be buying it.
Because when you’re chasing the markets, there’s no logical place for you to set your stop loss. What you’ll do is to just set any stop loss and enter any random level.
So when the market does a pullback, you’re toast and you’re out of the trade.
How to buy high and selling higher (before the breakout)
How do you buy high and sell higher?
Before the breakout where the market is at resistance, it’s near the highest.
I know it can be uncomfortable to pull the trigger.
But what you’re looking for is – a buildup at resistance.
It looks like a tight consolidation.
Just imagine this:
A series of small and tight candles cluttered together, this is what I call a buildup.
Ideally, you want to have 10 candles or more.
So whenever you see a buildup at resistance, this is a sign of strength because it’s telling you there are buyers willing to buy at these higher prices. They’re willing to buy in front of resistance.
If the price breaks out of the high, there’s a good chance the market will continue higher.
Don’t forget that since the price is at resistance, traders will go short.
And where do the short traders put their stop loss? Above the highs of resistance.
Because that’s what the textbook says, and what the courses teach. To put your stop loss above the highs of resistance.
And when a price breaks out of resistance, what happens? Well, momentum traders will buy the breakout. Short traders will get stopped out.
Their stop losses are actually buy orders which will also fuel the buying pressure. This leads to a higher probability of a breakout trade.
So the first thing to do when buying high and selling higher is, if the price has not breakout yet, you want to look for a buildup at resistance.
And then have a buy stop order at the highs to buy the breakout.
For your stop loss, you can just go 1 ATR below the lows of the buildup.
How to buy high and selling higher (after the breakout)
What if the price has broken out and you have missed the move?
You’re not in the party, and you’re too late.
What do you do?
Well, this is what I call – the first pullback.
Because whenever the price breaks out, it cannot go up without breathing.
Imagine that you sprinted 100 meters, 200 meters. You have to breathe and pause after a while. It’s the same for trading.
After the market makes a huge breakout, it needs to pause and breathe.
This is where you want to pay attention to the first pullback.
For those of you who are familiar with chart patterns, it looks something like a bull flag pattern.
To help you better time your entries, you want to overlay the 20-period moving average on your chart. Because when the price breaks out, it’s usually quite far away from the 20 MA.
So let the 20 MA catch up with the price.
And the only way for the 20 MA to catch up with the price is when the price starts to consolidate or do a pullback.
Sometimes you’ll notice the price starts to respect the 20 MA.
It bounces off it and starts to head higher.
When you notice the 20 MA starts to support the price, that’s where the price has made a pullback.
You want to get ready to buy the next breakout of the swing high.
For stop loss, you can just set your stop loss one ATR below either the 20 MA or the most recent swing low.
So that’s the second technique to share with you.
Don’t panic if the pullback is deep
Finally, the last one to share with you is this:
Sometimes, the market breaks out and the pullback is very deep and exceeds the 20 MA.
So what now?
What could happen is the market will start to form a new range.
You can identify the highs and lows of the range.
The range might even retest the previous resistance turns support.
So be patient and let the range form.
What you can do is to look to buy near the lows of the range.
You can look for a false break set up when the price triggers below the lows of the range and then makes a sudden strong reversal up higher back above support.
When that happens, this is what I call a false break – this is where you’ll look to get long again.
Does it make sense?
So with that said, that’s it.
I’ve come towards the end of today’s episode and I will talk to you soon.