Follow this trading rule. Don't be a dummy! with David Moadel
welcome to looking at the markets with David Modell there's a video I made
already called the three day rule some people listen some people don't so I'm
just gonna reinforce this right now you've got to follow the three day rule
if you're a swing trader and you like to buy stocks you like to buy companies on
the dip meaning when they go down a lot maybe the stock goes down a lot because
of a bad earnings report or because of bad news or a scandal or whatever okay
maybe Apple just didn't sell as many devices as they usually sell something
like that but you believe it's gonna recover you believe it's a great company
you believe it's gonna go back up I know it's tempting to just jump in there
right after the stock price goes down a lot but I'm going to encourage you to
wait three trading days at least I'm not saying you buy immediately after three
trading days have passed after a big dip in the price I'm saying you just look at
it okay and if the price action is starting to go sideways or better yet
it's starting to curl up then that's even better
that's a time that I might get in it depends on the news it depends on why it
went down there are a lot of things to look at alright so let's look at some
examples right now of what happens if you don't follow that rule okay this is
Twitter this is Twitter stock right here and let's take a look at Twitter stock
let's see what happened if you didn't follow that rule alright well it had a
big big drop there right and maybe you were tempted to get in maybe you're
tempted to get in on Friday well now it is
Monday and it's down another six over six percent alright so people who did
not follow the wait at least three trading days rule and then look at it
again they bought and now they're down quite a
bit what happens a lot of the time and this I know this is not a candlestick
chart this is a line chart but still imagine a very big red candle well what
often happens is is that after a very big red candle then the next trading day
oftentimes you'll get another red candle although it won't be as big and then the
next day you might get another red candle but it's even smaller okay so the
red candles get smaller than the first really big one but they're still red
it's still going down it oftentimes tends to drift downwards for at least
three trading days all right so that's Twitter that's one example here's
another one here's Facebook had a big drop
alright right there on Thursday big drop and then if you hadn't waited at least
three trading days now it's Monday and you'd be down an additional four percent
or approximately four percent so you should have waited should have applied
the three day rule here's let's take a look at PayPal it's
not as drastic looking but still a pretty sizable drop there all throughout
Friday so that's the best pretty sizable drop there and if you just jump right in
today's the next trading day Monday and you would have lost an additional three
percent or approximately three percent and this is PayPal let's take a look at
CBS this is CBS stock all right big drop on Friday big drop and if you
had just jumped right in guess what you'd be down today monday over four
percent all right so I recommend waiting at least three
trading days watch for those red candles to get smaller and smaller every day
hopefully and better yet maybe you'll get some sideways action and even better
the mat is if it starts to curl upwards and that gives you an indication that
perhaps the market is starting to forgive the company and forgive the
stock and maybe they'll go beat up on some other company and some other stock
and they'll be done beating up on the one that you're looking at and that
might be the time to get in it depends on why it went down you got to look at
the news you got to look at the chart you have to look at a number of things
okay and these are things that I help people with my name is David Modell if
you'd like some help with trading chart reading investing putting together a
plan for your trading and or investing you can email me anytime my email
address is David Modell at gmail.com I also offer an alerts service if you like
alerts alerts or signals as to what I'm buying and when I'm buying it and
selling it we can talk about that as well if you like this video please give
it a thumbs up on YouTube and please leave comments and subscribe to my
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updates whenever I put out these financial educational videos it's
important you got to follow that three day trading rule you don't have to but I
do and it has helped me to avoid disasters and it can help you too thank
you so much I appreciate it and I'll talk to you again soon