DreamTai Trading Software Blog

How to find the BEST STOCKS to trade using DreamTai: A 7 Step Process

2021-10-31T14:26:00.001-04:00

Here is an 7 step process for finding the Best Stocks to trade at any given time

It is very important to select the stocks which have best chances of moving up.

You do not want to select just any stock which popped up on any day.

STEP 1. Check the overall market

Check the following ticker symbols in DreamTai

SPY
QQQ

These two symbols are the symbols for ETFs which track the overall market.

SPY tracks the Standard and Poors 500 Index

QQQ tracks the Nasdaq index

If both of these are showing GREEN bars, the overall market is bullish.

So, it is a good time to buy.

You can risk two percent ( 2.00 %) of your total capital in any stock trade in good bullish markets

If the chart of any one of these two ETFs show RED bars in DreamTai, it means that markets are bearish.

Now, the overall market is not suitable to buy.

If you still feel like buying, just risk 1 percent (1 % ) of your total capital in any trade.

As of October 11, 2021, the SPY is RED. That means the current market situation is bearish.

So, if I buy any stock, I will NOT risk 1% of total capital. I will just risk 0.5 percent of the total capital.

STEP 2. Search for Trending stocks and stocks making 52 week highs and make a [TO BUY] Stock List

The following links can be useful

Top 100 Trending stocks

https://www.barchart.com/stocks/top-100-stocks?orderBy=weightedAlpha&orderDir=desc

52 week high stocks

https://www.barchart.com/stocks/highs-lows

Let us suppose you find two stocks, which based on your research looks to be trending up. Also, the news for these stocks are good and the analyst ratings are good/

These two stocks are [AR] and [PALT]

We need to filter these stocks so that we can ONLY BUY THE BEST STOCKS

STEP 3. Check Weekly Charts and remove the weak stocks from the [TO BUY] Stock List

You can use BigCharts.com to check weekly charts

http://www.bigcharts.com

1. AR weekly chart

The weekly chart for AR is good and uptrending. Which is a good sign

2. Weekly PALT

The weekly PALT is not so good. It does not go up steadily.

It went up in a jerky manner may be because of news.

I do not prefer to buy this stock. It looks to be volatile.

i do not want drama..just predictable smooth uptrend.

Remember, we just want the best, nothing but the best.

Based on our analyis, we have decdded to remove PALT from our list and just focus on AR stock.

STEP 4. Check the Power Ranking of the two stocks in DreamTai

Both stocks have Power Ranking above 3. That means that the buyers are serious in entering this stocks and there is a large buyer volume.

STEP 5: Create a Trading Plan based on your analysis

Go to http://dreamtai.com/calc/trade_management.php

Stock Name:

We had decided to buy AR stock and are going to risk only 1 percent of total capital as per step 1

Total Capital:

Assume, that you have $100,000 as your total capital.

Put that value in the Total Capital text box.

If your total capital is something else, put that value in this box.

Risk Percentage:

We had decided to buy AR stock and are going to risk only 1 percent of total capital as per step 1

So, enter 1

Entry Price:

Stop Price:

You can get the Entry Price and Stop Price values from DreamTai chart

Click on the Calculate button.

You will get the complete Trading Plan.

Step 6: Put Buy Order Trade and put Stop Loss Orders

Go to your brokerage website and put your buy order. After stock purchase, add a stop loss order as shown in the Trading Plan.

Step 7: Manage your Trade

Every day, keep check of the blue stop loss line.

As time passes, the blue line will slowly move up.

As the blue stoploss line moves up, keep moving your stoploss up,

so, you are slowly reducting your risk as time passes.

Also, take profits on part of your stock quantity when the stock treaches the Target Price.

* If you do not see the Blue Line on DreamTai stock chart, just RIGHT CLICK on the stock chart and

select [Show Stop Line] from the menu

Refer the following webpages

http://dreamtai.com/calc/trade_management.php

https://dreamtai.blogspot.com/2021/08/trade-management-plan-how-to-manage.html

https://dreamtai.blogspot.com/2021/08/three-day-trailing-stop-rule-to-exit.html

Trade Management Plan: How to Manage your Trade

2021-08-13T00:30:00.002-04:00

Here is a simple Trade Management Plan based on the plan developed by Peter Brandt and explained in his excellent book “Diary of a Professional Commodity Trader”

Suppose you decide to buy a stock.

At time of purchase, you should have a complete plan on how to manage your trade.

Let us take a simple example.

Today is August 13, 2021

You have looked at different stocks in DreamTai and have decided to purchase a stock named Rapid7 ( Ticker Symbol: RPD)

As per DreamTai, the buy price is 113.40

Stop = 108.86

Let us make a Trading Plan for this trade.

Go to the following weblink for Trade Management Calculator

http://dreamtai.com/calc/trade_management.php

Let us assume that you have $100,000 total equity.

You just want to risk 1% of the total equity on this trade.

The entry price, as per DreamTai is 113.40

The Stop Price as per DreamTai is 108.86

Enter these values in the Trade Management Calculator and press the CALCULATE button.

You will get the complete Trading Plan for this Trade.

Take a printout of this page and refer to it every day, to track your trade.

When the stock reached Target 1, sell half the stock.

When the stock price reaches Target 2, activate the Three Day Trailing Stop Rule.

To learn more about 3 day trailing stop, go to the following link.

https://dreamtai.blogspot.com/2021/08/three-day-trailing-stop-rule-to-exit.html

Three Day Trailing Stop Rule to exit a Trade

2021-08-12T23:42:00.003-04:00

This rule was developed by Peter Brandt and explained in his excellent book “Diary of a Professional Commodity Trader”.

Note:

Please refer the following link on how to manage your trades

https://dreamtai.blogspot.com/2021/08/trade-management-plan-how-to-manage.html

I will try to explain this rule with examples.

1. As soon as you enter a trade, place a stop loss sell order.

2. Also, decide where the Target Price should be. You should be able to exit the trade at the Target Price.

3. When the stock price has risen to about 70% of the Target Price, you should start implementing the 3 bar trailing stop rule.

See the chart of a sample trade below.

You have purchased the stock at 4.4

The Target Price of the stock is 5.0

Total movement of stock price from entry to Target Price = 5.0 – 4.4 = 0.6

When the stock price reaches about 70% of this price level, you should begin implementing the 3 bar trailing stop loss method to get out of the stock.

The method requires 3 days of price action:

a. Day 1: A new high day : When a new high is made

b. Day 2: A set up day : When close is BELOW low of Day 1

c. Day 3: A trigger day : When close is BELOW low of Day 2

You should sell the stock at close of Day 3.

These 3 days need not be consecutive. That is, there can be other bars between these three days.

See the example chart

A high was made at 5.32. That bar is higher than the previous bars.

That bar is Day 1 bar.

The next bar after the Day 1 bar closed higher, so we can ignore it.

After this, the next bar closed lower than Day 1 bar. This is the setup bar or Day 2 bar.

After Day2 bar, the next bar closed lower than Day 2 bar. This is the Trigger bar. You should sell the stock at the close and exit the trade.

Useful Links:

https://peterlbrandt.com/wp-content/uploads/2016/03/3-Day-Trailing-Stop-Rule-3DTSR.pdf

https://uk.tradingview.com/script/MBYW84lZ-3-Day-Trailing-Stop-Rule/

https://dreamtai.blogspot.com/2021/08/trade-management-plan-how-to-manage.html

How to screen for and find Trending Stocks in LESS than 5 minutes

2021-07-25T08:12:00.006-04:00

Here is how I find trending stocks in less than 5 minutes every weekend

I use a method similar to the method used by Matthew Kratter in his excellent book [Rocket Stocks].

[Note: DreamTai is not affiliated to Matthew Krater]

You need to use Finviz, which is a free website to screen for stocks

1. Finviz.com for screening stocks

https://finviz.com/screener.ashx

Theory

All good trending stocks keep on moving to new highs ..That is..they just keep on going higher and higher.

So, we should search for stocks which are hitting 52 week high as initial screener.

Besides this, we should also search for stocks which have more than 10% of total available stock quantity sold short. When the stock moves up, the short sellers will be forced to buy back the stock. This will make the stocks zoom up faster.

Also, we search for small capital stocks which are not yet under the radar of hedge funds and big institutions.These are stocks with market capitalization under $10 billion.

Also, the stocks should be trending. That is, the stock should be above the 50 day moving average and 200 day moving average.

After you filter these stocks, enter these stocks in your watchlist in DreamTai.

Find out those stocks which have DreamTai Power Ranking ABOVE 3.

These stocks have huge bullish volume.

Then, make a decision on whether you want to buy these stocks. Make sure that you risk less than 2 percent of your total capital in any trade.

Keep checking for such trending stocks every weekend.

You do not need to do this daily.

Stock Screening in Action:

Here is stock screening done on July 25, 2021

1. Go to FinViz.com stock screener

https://finviz.com/screener.ashx

2. Add the following filters

a. Market Cap under $10 billion

b. Float Short Over 10 percent

c.. Go to Technicals Tab

52 Week High Low has New High

d. Price above 50 day moving average

e. 200 day moving average is below 50 day moving average

f. Get the initial filtered list and input them in DreamTai

I got seven stocks (July 25, 2021)

I added these stocks to DreamTai watchlist.

g. Only select stocks with Power Ranking Greater than 3

There are 5 stocks with Power Ranking greater than 3

CNTB
CRTX
RPD
BCYC
WRLD

h. Research these shortlisted stocks and make a Trading Decision to buy or do nothing

Do furthur research on these stocks and then make a decision if you want to buy or not.

If you do decide to buy, make sure that you risk less than 2 percent of your total capital and you place stop loss.

How to format and view Crypto Currencies in DreamTai

2021-05-15T18:47:00.002-04:00

DreamTai does not have datafeed for crypto currencies.

However, if you get data for these from your data providers like Yahoo, you can format the prices and view them in DreamTai.

For BitCoin, the price data is available in sites like Yahoo Finance.

You can download the historical data and use PriceFormatter program to convert the prices to DreamTai format.

1. Download the file [PriceFormatter.zip]

Contact DreamTai com Inc. for the [PriceFormatter.zip] program.

Save the file in the following folder: and save it in the following folder:
[C:\DreamTai_50225]

2. In File Explorer, go to the folder [C:\DreamTai_50225]

3. Right click on the file [PriceFormatter.zip] and from the menu select
[Extract All]

4. You will see a window [Select a Destination and Extract Files]
Input [C:\DreamTai_50225\PriceFormatter] in the text box.
Click on the [Extract] button.

5. You will see that a new folder [PriceFormatter] has been created inside the
[C:\DreamTai_50225] folder.

6. Go to the folder [C:\DreamTai_50225\PriceFormatter\input] and save all the
data files you have downloaded from Yahoo Finance.

In the picture below, I have downloaded and saved historical data from Yahoo for Bitcoin, Dogecoin, Etherium and for the stock Oracle

7.Go to [C:\DreamTai_50225\PriceFormatter] folder and run the program [runPriceFormatter.bat] file.

Depending on your computer configuration, it may be called just [runPriceFormatter]. There may be no [bat] at end of the file name.

8. The PriceFormatter program will format the files and put the formatted files in
DreamTai Price folder.

It will open a window and show the status. Press any key after it is done, to close the window.

9. Go to folder [C:\DreamTai_50225\data\pricedata]
You should see the formatted files there.

10. Add the symbols in your watchlist
Go to folder [C:\DreamTai_50225\data\watchlists]
Open file [WL_1.txt] in notepad.
Add stock ticker symbols, one symbol per line.
Save and close the file

11. Start DreamTai and select Watchlist 1 (Assuming that you added the symbols in WatchList 1)
When you see a popup window [Should I download prices from the internet], select [No]

12.You should see the charts of the symbols you have entered.