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The dead cat bounce.
A master stock technique that many speak of, but few can profit from. They are true test of your ability to run the market waves like a true pro, but can you really turn these tiny jumps in profits? You bet you can.
We are going to look at how you can a few ways to spot the trends that turn dead cat bounce hunters into stock trading geniuses. No more fluff, here’s how you can turn a dead cat bounce into a profit maker.
Trends Come in Waves, Keep a Watchful Eye.
If you are looking to find the dead cat bounce that leads to the big profit boost in the long run, you have to pay attention to the investment. If the trends in the market are shifting to favor the industry your investment is in, you’re in business. If the company is about to break through with the next generation of technology, you’re in business. If the markets aren’t really showing a future that favors your investment in the long run, cut your losses and sell at the top. There is always going to be another investment opportunity that can make profits. If you were wrong, and there is a longer wave than you expected, you can always jump back in if that grass is really that green.
Keep in mind that trends are like stocks, their strengths tend to come in waves. Just like identifying a dead cat bound in a pattern of threes, you tend to see the same when it comes to stock patterns rising. Just because you have let go of a stock or option doesn’t mean you should forget about it. Someone might make the next big thing, you and should be ready to jump back in and ride that wave up.
Make it a point to stay on top of the news surrounding your investments in the market. If you aren’t keeping a watchful eye, you could miss a big break that turns your dead cat bounce market plan into a dead cat. No one wants that. With that said, it’s also important to keep politics in mind. Though no one wants to hear your opinion on them, they do affect market outlooks. Take the repeal of net neutrality for example. Basically, the repeal of net neutrality killed the idea of BitCoin. If you has investment in BitCoin, and you knew this could happen, you should have sold off right before it was official. The price all but tanked aftwards, and those who were unaware of it happen found out pretty quickly.
Set Your Boundaries
It’s you money, so you need to be careful with how it’s being used. To do that, you should set some boundaries for you investment. Think of these boundaries as a moving safety net that helps you makes smart moves with your investments. If you set a floor, you can’t really lose your investment, especially when you are hopping in on an upward trend. So, what does setting a floor look like? A floor is a sell off point that you will sell if you hit this number instead of riding out a loss. It’s a control number for you, so you don’t lose money and continue investment growth. If you buy in a $1 a share at 1000 shares, you want to ride out that upward trend. If the peak happens sooner, your control number will come into play, so you sell off at $1.05 a share instead of below your initial investment. Those small moves start to add up, and soon you can be riding dead cat bounces with massive float share counts. Remember, this floor should move with the new highs of your investment. Typically, you want to move you new floor to each bottom created on the way up. The ups and downs if you will. If you move your floor up with those waves, you will make money no matter what.
Pick A Solid Timeframe
A few days to a few weeks is always a safe way to look at investments if you are looking to make quicker money with these dead cat bounce trades. Remember, day trader rules put restrictions on your accounts, and being labeled as one can require you to cough up a large some of money to the market. Try making buys and sells on different days to avoid activating the day trader policy. Quick moves are always nice, but don’t risk losing everything to the market for day trades.
If you spread your trades over a few days, you have more chance to profit with your stockes, especially with high volatility stocks. If you catch the right wave, a quick three day investment of thousands of float shares can rack up profits quick.
Shoot for shorter trading cycles when you start, but stay away from pattern day trading. I know we brushed on this before, but it can’t be stressed enough. If you don’t have $25k handy to fork over to the market for the label, shoot for cycles that last a few days. You can find plenty of dead can bounces happening in those cycle times, and you might even find a gem if you study the data far enough back.
Take Your Time, Test Your Dead Cat Bounce Skills
Making a profit from a dead cat bounce is more than possible when you analyse your situation, and really feel the sway of the market. Understanding how major breaks in a market can change the value of your stock is the best way to protect your profits when investing in a dead cat bounce. If you put your money in a falling stock that has no positive news behind the company, you’re just going to lose money on your investment.
Investing your money into dead cat bounces can be scary. Instead of throwing your hard earned dough that could go either way, test it first. Analyse the market, and locate a stock that meets the dead cat bounce requirements. Check the market waves for the stock, and pick a point the “invest” what you would actually plan invest. Write that number down and the starting price of the stock instead of actually buying it. Once you have that number, sit on it and “sell” when you would plan to actually sell. If you can run a few successful test campaigns, you are sure to find success when you invest your money for real.
It takes a bit of savvy study time to find the best opportunities for profiting from a dead cat bounce, but it is possible. Take your time and use these tips to make the most out of buying into a dead cat bounce stock. Do you have any tips for investors looking to make profits from dead cat bounce investments? What is your special key for dead cat bounce success? Tell us more in the comments below.