Here at Active Trading Partners, we like to look for reversals.  Sometimes reversals are from extreme oversold conditions if you are scaling into a long position in a stock or ETF, and of course if you are going short they are from extreme overbought conditions.

There are a few ways to reduce your trading risks and we employ those at ActiveTradingPartners.com.

1.  We use a “Scale in and Scale out” method for entering and exiting our trades.  This means we look to buy in tranches of about 1/3 of an intended $$ position at a time.  We look for Fibonacci pivots and oversold indicators to begin working into a position, but never all at one time.

2. We look for “Waterfall declines”.  That is right, we like to buy when everyone else likes to cry.  This means we prefer to enter trade set ups when it appears the vast majority of the downside risk has been “wrung out” as it were.  Recent example was our entering OREX at 4.01-4.12 after it had waterfall declined from $6 at it’s high.  The stock rose over 18% within 72 hours.

3.  We like Waterfall patterns in ETF’s as well, trading the opposite pair off the baseline ETF.  For example, if I think the SP 500 index is in the process of topping out, then we take positions in the Bear ETF such as BGZ to take advantage of the upside exhaustion and corrective reversal.  We enter into the BGZ trade 1/3 tranche at a time, carefully watching for Fibonacci pivots, Elliott Wave patterns, and exhaustion signals.

If you would like to improve your risk adjusted trading results, minimize your losers and maximize your winners, please give us a try.  Click HERE to subscribe you’ll be up and running in no time!