A while back before the time when everyone had access on the Internet and traders were a bit less sophisticated, the 52 week high/low point was called a breakout point where markets broke out and continued moving in the same direction with momentum. With time as more traders caught to this method to buy together with sell near the 52 full week high/low price, markets began demonstrating a lot more false breakouts near this price level. As a result the fifty-two week high/low began losing all credibility as having almost any edge that could benefit traders or increase their odds of winning.
You want to start by finding Stocks, Futures Or Forex markets which can be touching the 52 week high/low price level. You want to find markets which can be not edging slowly towards the particular 52 week level but are usually gravitating towards that level with additional volatility and momentum. The more volatility and momentum you notice near these levels at least initially better. In this example you will notice how a stock approaches the 52 week level as being a magnet. You should also ensure the markets you pick get sufficient volatility under normal buying and selling conditions; therefore you should decide on your markets carefully.
After several years of monitoring how markets behave close to the 52 week high/low price amounts, professional traders realized more often than not markets hit the particular 52 week high/low area and pulled back before again approaching the area and breaking out with strong momentum your second time around. To take benefit of this price action, I created a terrific day trading strategy that uses the 52 week high/low price points without subjecting me on the draw downs and pullbacks that occur near these price levels.
Once the market hits the 52 week high/low level you must see an instant pullback clear of that price range. The market should then take from 1 to 3 weeks to consolidate and try again your second time to break through the particular 52 week price high/low amount. In this example the stock quickly pulls back and consolidates around 2 weeks before trying again to reach for the 52 week high level.
As you monitor the market daily notice and keep track of the high that was made your day the market made the fifty-two week high/low price initially. Your job will be to enter an entry stop order daily $0. 25 cents above that will initial 52 week high/low price. You only want to enter the order to the first hour of the buying and selling day. The breakout that should follow should be very powerful and tends that occurs near the opening bell. I rarely see breakouts that occur late in the day that have sufficient momentum to generate the trade worthwhile. If you are not filled during the first hour on the trading day you should cancel your own order ASAP. You can see on this example how the stock gaps up and doesn't turn back down. The volatility should be similar to what you saw during the 1st time the breakout occurred.
In this example you will observe the entire trade progression from needs to end. The entry occurs $0. 25 higher than the 52 week price high. In this case the gap occurred at the opening bell and we were filled substantially higher than $0. 25. This is not something you have to be too concerned with because usually momentum originating from gaps near the 52 full week high levels tends to follow through such as this example. Once you are filled you need to place your stop loss order below the reduced that was made the day prior to your entry.
In this example the particular stock only pulled back with regard to 6 days. The pullback is usually quicker to the downside at the same time. Notice how the breakdown below the 52 week low was volatile whenever again started with a tiny gap. The gap is not a necessity but you will notice it often when trading this course. The second breakout below the 52 week low will carry strong momentum.
In this example you will observe how the stock makes your initial 52 week low. This is if we begin monitoring the stock to the next 1 to 3 weeks to determine if it pulls back up and is true of another try to break through the 52 week low level. It is best to trade to the downside as often as you trade on the upside. The momentum is typically stronger and quicker to the downside compared to the upside the vast majority of time.
You can easily see the entire sequence of the trade on the downside. In this example I use two different stocks though the 52 Week Pop Strategy works as well with commodities, futures and foreign currencies. I've been trading this strategy using gold and silver coins and currencies for over 10 years with consistent results.
When trading the 52 Week Pop you should utilize 15 minute bar charts the day you intend to enter the market when stock trading. For other markets I tend to use 5 minute bar charts but stocks respond well to 15 minute period. I always use the day-to-day chart to isolate the pattern and make sure that it's setting up correctly. Once the set up is correct and my order is entered I switch on the shorter time frame to ensure the pattern is developing appropriately. My stop loss is placed several cents below the low prior to your entry day breakout morning. The market should never get back on this level if the trade is training as planned. Also keep in mind that you should never enter the trade as soon as the first hour of the morning. This method thrives on momentum so if your market doesn't start out that way in the morning the odds are it won't begin throughout the trading day. Lastly, make sure you keep the trade open till the conclusion of the day to give yourself the highest odds of achieving maximum benefit potential.