Squeeze Trade Examples

If you haven’t visited our “What’s A Squeeze Trade?” page yet, be sure to check it out to learn how this powerful trade indicator works.

The Investor

Not only does the squeeze trade work for short term timeframes such as day trades and swing trades, it can also be a powerful indicator of when the best time to invest is.

The longer the timeframe, the rarer and more powerful the squeeze indicator becomes. Daily squeeze indicators on stocks happen a few times a year, meanwhile, monthly squeeze indicators happen once every 4-5 years for stocks. But when they happen, the profit taking opportunities can be huge.

Investors can use monthly squeezes to their advantage by placing their money in the right place at the right time. And when the squeeze runs out of steam? Simply close out the position and put your investment into another stock that’s freshly firing off a monthly squeeze.

This Logitech trade indicated a squeeze signal at $7.03, trading up to a maximum value of $16.77 over the course of 11 months. That’s 239% gain for the year. Talk about effective investment strategy. Meanwhile mutual funds and indexes are scrambling to try get 8% returns to investors. knowing how to spot squeezes in combination with your personal investment skills will allow you to make smarter and more profitable choices.

The Day Trader

We’ve seen the power of the squeeze on long timeframes, but what about those who want to generate income and cash flow with faster more fluid trades?

After all, chances are you aren’t a huge bank or hedge fund, so whether you’ve realized it or not, your greatest weapon in the stock market is your ability to enter and exit trades without influencing price.

Think about it. A large fund trying to buy or sell millions of shares of stock has to do so in small chunks separated by waiting periods. They can’t buy or sell all at once because doing so will either crash the price of a ETF or it will show their hand to the rest of the world (at least to those people who know where to look). And in the stock market, much like in poker, you never want to show the cards you’re holding until it’s the right time.

Your biggest advantage as a trader is your ability to enter and exit trades unseen. You are like a large jungle cat stalking his prey, waiting for the right time to strike. And that’s where the squeeze comes in. Applied to smaller timeframes such as the 1 minute or 5 minute charts we see here, the small trader can get into a trade at the most opportune moment, taking his profits and disappearing not moments later.

Not all squeezes were created equal, and when attempting this technique in faster timeframes a trader must constantly be aware of the trend so as not to go against it. Remember, the trend is your friend.

The Swing Trader

You don’t have time to watch the markets 24/7, but you also don’t have the patience to invest in a stock and wait by idly for months or years while it grinds its way up, so you put in trades based off stock trends and take them off hours, days, or even weeks later. This is an effective strategy to increase your profits by moving your money around more frequently to those areas of the market which bear the most fruit. It also reduces your risk of loss, as one of the largest mistakes new traders make is over-trading. Luckily the squeeze trade is by far the most effective when utilized on weekly or daily charts.

Have you learned about Pivot Points yet?

If you haven’t visited our “What’s A Pivot Trade?” page yet, or viewed our Pivot Trade examples, be sure to check them out!

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