This post is written by Jet Toyco, a trader and trading coach.
Here’s the reality:
Parabolic stock trading is a “idiot’s trap” for brand spanking new traders.
Why?
On almost every platform you mostly see this:
It’s really easy to identify!
So, what involves your mind every time you see those lists of stocks flying?
That’s right.
Money.
Quick profits.
Greed.
But if you have a look at one in all the charts, you see this:
That appears like a freakin morse code!
Now, it’s obvious that these sorts of stocks are to be avoided as this tends to occur:
Yep, a pump and dump.
Nonetheless!
What I’m going to show you today can be something different.
Especially on the way to discover a sustainable stock for parabolic stock trading.
More specifically, you’ll learn:
- What a parabolic stock is and its different forms
- A hidden (dark) secret about parabolic stock trading that it’s best to know
- Two indicators it’s best to use when trading a parabolic stock
- An entire top-down parabolic stock trading strategy
Are you ready?
Great!
Oh, and by the way in which…
This is applicable to just about all stock markets on the market.
So, let’s start!
Parabolic stock trading: What’s it and when does it occur?
A parabolic stock is produced when its price increases (or is increasing) in a brief period of time comparable to gaining greater than 10% in a single day.
It looks something like this:
In other words…
It often looks like a giant fat middle finger in your chart!
Now, these sorts of movements are quite the anomaly.
Why?
Because with just the snap of a finger…
A parabolic stock suddenly gained popularity even (and sometimes) without a longtime trend in place!
Seems pretty fishy, right?
How come a stock you’ve most probably never heard of suddenly got here into popularity?
This, my friend…
Is something that we’ll dive into in the following section.
So, follow me here.
The HIDDEN truth about parabolic stock trading
Here’s the thing…
I’m not here to inform you to:
“Follow the institution’s money!”
“Parabolic stocks are manipulated by hedge funds!”
“Parabolic stock trading is a scam!”
Why?
Because we’ll never truly know and I’ll just be making assumptions!
But what can we know?
What can we consistently indicate every time we’re looking a stock for parabolic stock trading?
Two things:
- The Volume
- The Fundamentals
Let me explain…
The typical volume
Once I say volume I don’t mean this:
That’s right, actual numbers!
So, why should this be the very first thing to search for?
Easy!
If the value is being pushed by a number of people, then it’s a parabolic stock you have to avoid.
Nonetheless, if the amount that’s being traded has great value…
Then you definately may be rattling sure that it’s a star stock that tons of fans are riding into!
It’s such as you spotting Bruno Mars in the general public!
But you’ll be able to be rattling sure that you just’re not the just one craving for a selfie with him (which is nice).
Is smart?
P.S. Such volume scanners may be found on free scanning tools comparable to finviz for the US stock market.
Now…
The following one can be a bit of bit different than usual.
The Fundamentals
Imagine…
You’re at a public place and also you suddenly see Bruno Mars as mentioned previously.
A celeb!
You will need to get his autograph!
You will need to kiss his cheeks!
But as mentioned within the previous section…
You’re not the just one who’ll be attempting to do the identical thing!
But then something happens…
One in all the group pulls his hair and his eyeglasses fall…
It seems?
It’s a Bruno Mars impostor!
Then what happens?
That’s right, everyone either runs away or bashes that impostor!
And this, my friend…
Is identical on the subject of parabolic stock trading:
People leave once they realize that there’s no story behind it!
That the move is just not sustainable!
So how do you search for a sustainable stock for parabolic stock trading?
That’s right, with fundamentals.
Now should you’ve been following our training guides you understand that technical evaluation is enough.
Because it is what we mostly use!
But on the subject of parabolic stock trading, it’s a distinct case as fundamentals give volume an additional pump or boost into the move!
So, other than volume…
What fundamentals do you have to look out for?
P/E Ratio?
Financial reports?
Earnings per share?
Excellent news…
It’s none of those!
As what you wish is a “story” behind that recent +10% move.
That’s right!
Not numbers, ratios, and formulas, but simply a compelling story!
Now…
Trading with fundamentals deserves in-depth training in itself.
But to consistently search for good stories behind a parabolic stock you have to at all times consider two things:
- You will need to be consistent with the platform of the story you’re on the lookout for
- The source/platform have to be credible
Is smart?
So, here’s the thing…
What I’ve taught you latterly is the way to find and choose a stock for parabolic stock trading.
But how exactly do you trade it?
How do you manage the trade after you purchase?
What do you have to do?
Well…
Let me show you in the following section!
Parabolic stock trading: 2 secret ways on the way to ride a parabolic stock
Now that you’ve got a consistent approach to finding and choosing a parabolic stock…
How do you have to trade it?
Well, there are two ways you’ll be able to go about trading this:
- Lower timeframe (H1)
- Higher timeframe (D1)
Let me show you the way…
Lower timeframe (H1)
First!
The rationale why I selected the 1-hour timeframe is that the stock market isn’t open 24 hours identical to the Forex or Crypto market.
Because of this the 4-hour timeframe won’t apply.
Second!
It is best to only select this method provided that your lifestyle supports it.
In the event you’re a part-time dad with two babies with a full-time job…
The one thing you’d gain from this is just not more cash but more eye bags!
Now…
The rationale why we go to the lower timeframes is that it gives you a greater picture of what the value motion is.
From this…
To this…
And what are the things that it’s best to search for?
Easy, a flag pattern:
As you understand…
Flag patterns are a temporary pause in an existing trend!
(And by the way in which, they’ll are available different shape or form.)
Which makes it an area of value so that you can hop into the hype train.
So, once it makes a bullish candle breakout, then you definately can enter at the following candle open:
(and by the way in which, I suggest you be conservative and only allocate 10-20% of your capital)
So, when you’ve entered…
How do you manage the trade?
The reply?
A good trailing stop loss.
Ah yes, I do know, not the reply you’re on the lookout for.
But it is because there are various indicators to go about this!
It could possibly be through a…
15-period moving average exit:
6-period ATR exit (chande kroll stop):
Finally, a 10-day low Donchian channel exit:
Holy *beep* that’s lots of indicators?
Which one should I select?
On this case my friend…
I’m encouraging you to grasp the indicator and select one which is smart to you essentially the most!
So, if you should learn more, you’ll be able to try these guides…
The Moving Average Indicator Trading Strategy Guide
Donchian Channel Strategies That Work
The Complete Guide to ATR Indicator
Next!
Higher timeframe (D1)
You’re probably pondering:
“Eeeew the each day timeframe, it’s so booriing”
“There’s no money to be made within the each day timeframe ugh!”
Now, hold on my friend!
Since we’re coping with a parabolic stock trading method (which doesn’t last long mind you)…
You would like to ensure that you just’re also using a “tight” trading tool to enter and exit quickly!
So, what is that this tool you could ask?
The Heiken Ashi Candlestick!
I could spit out lots of formulas on how it really works.
But mainly, it’s like a candlestick moving average!
So, when do you hop into the trade?
First, is if you’ve identified a stock that’s made +10% two days in a row (with an excellent “story” behind it)…
Then enter on the opening of the Third day…
By the way in which, it’s easier to us the standard candlestick charts to find out the +10% entry condition and entry trigger for the primary steps!
But you could be wondering…
“Why do I enter the Third day?”
“Why not the first day?”
Good query!
You see…
Our entry condition with the Heiken Ashi is simply too loose.
Simply enter if the present Heiken Ashi bar is green!
Which is why we’d like an additional layer of confirmation.
Is smart?
So, when do you exit?
The alternative thing!
You exit when the Heiken Ashi closes two red candles in a row!
Now…
I do know I’ve spent lots of time sharing with you the principles of every element on this parabolic stock trading strategy.
So, let me provide you with a fast recap…
On the lower timeframe (H1):
- You search for a stock that has gained +10% in a single day with an excellent story/fundamental behind it
- You enter when that stock makes a bull flag pattern breakout on the 1-hour timeframe the following day (after it has made a +10% gain)
- You employ a good trailing stop loss on the 1-hour timeframe as your exit trigger
On the upper timeframe (D1):
- You search for a stock that has gained +10% in a single day with an excellent story/fundamental behind it
- You wait for a stock to shut +10% again on the second day and as a green Heiken Ashi bar
- You enter the market open on the Third day
- You exit if the stock makes a red Heiken Ashi bar two times in a row (exit on Third-day market open)
There you go, my friend!
An entire parabolic stock trading strategy with the pliability so that you can tweak some settings!
Now before I end this guide…
Here’s something you have to know in regards to the parabolic stock trading strategy…
As discretionary traders…
You will need to test this method first before you risk your hard-earned money.
Why?
Because you have to construct the arrogance to trade it!
Why trade with blind trust, right?
Also…
This training guide is written in a way that also applies to other stock markets on this planet.
That’s right, not only within the US Stock Market.
Because of this I kept things more generalized!
Sounds fair?
And at last…
There are a lot of ways how you’ll be able to go about choosing stocks using fundamental evaluation.
So, I suggest you incorporate the concept into your method should you use fundamentals!
Got it?
P.S. If you should know the alternative of parabolic stock trading then you definately can try our falling knife guide here.
So, with that said, let’s do a fast recap of what you’ve learned today!
Conclusion
- A parabolic stock is formed when a stock jumps in price by greater than 10% in at some point
- Using each volume and fundamentals is crucial to identifying good stocks to trade for parabolic stock trading
- You may trade a parabolic stock from the 1-hour or from the each day timeframe depending in your lifestyle
Over to you…
Which stock market do you trade?
The Indian stock markets?
The Philippine stock markets?
In that case, do parabolic stocks often occur?
And what are some tools that you would be able to recommend?
Let me know within the comments below!