Dan Zanger’s 10 Golden Trading Rules

[Henrik Ekenberg]

Dan Zanger's 10 Golden Trading Rules

1. Make sure the stock has a well-formed base or pattern.
Start by identifying stocks with solid bases or well-formed patterns. This foundation is critical for determining the potential success of a trade.

2. Buy the stock as it moves over the trend line of that base or pattern and ensure volume is above the recent trend shortly after this breakout occurs.
Never pay up by more than 5% above the trend line. Familiarize yourself with your stock's thirty-day moving average volume, which is available on most stock quote pages.

3. Be very quick to sell your stock if it falls back under the technical buy area or breakout point by $3 to $5.
The more expensive the stock, the more leeway you can give it. Some traders use a 5%-7% stop loss rule, which may mean selling a stock that fails shortly after breaking out.

4. Sell 20 to 30% of your position as the stock moves up 15 to 20% from its breakout point.
Lock in some gains as the stock appreciates, helping to reduce risk while allowing you to capitalize on the upward move.

5. Hold your strongest stocks the longest and quickly sell stocks that stop moving up or are acting sluggish.
Remember, stocks are only valuable when they're moving up. Don't hesitate to exit positions that aren't performing.

6. Identify and follow strong groups of stocks and focus your selections within these groups.
Strong sectors often lead the market, and being aligned with them can increase your chances of success.

7. After the market has moved for a substantial period, your stocks become vulnerable to a sell-off, which can happen fast.
Learn to set new higher trend lines and recognize reversal patterns to help you exit. Some may benefit from reading a book on Candlesticks to improve their understanding of reversal signals.

8. Remember it takes volume to move stocks.
Get to know your stock's volume behavior and how it reacts to spikes in volume. Volume is key to understanding a stock's movement and success or failure.

9. Just because a stock is mentioned with a buy point in a newsletter doesn't mean it's an outright buy when the buy point is touched.
Evaluate the stock's action and its volume at the time the buy point is hit. Also, consider the overall market environment before making a purchase.

10. Never go on margin until you have mastered the market, charts, and your emotions.
Margin can amplify both gains and losses. It's crucial to have a solid understanding and control over your trading before using margin, as it can quickly wipe you out.

[Investgbg]

Great thread! 👍 Do you know how Zanger trade longs vs swings? The rule of selling 20-30% after 20% advance sounds more of a long position since he let the rest run. 

[Henrik Ekenberg]

Dan Z. is a Swing trader.

[Henrik Ekenberg]

10 Golden Rules of J. Dan Zanger - $42 Million in Just Two Years

1. Ensure the Stock Has a Well-Formed Base or Pattern: Before considering a purchase, make sure the stock exhibits a well-formed base or pattern, such as those described on this website under the "Understanding Chart Patterns" tab on the home page. Dan highlights stocks with these patterns in his newsletter.

2. Buy on Breakout Over the Trend Line with Volume: Purchase the stock as it moves over the trend line of that base or pattern. Ensure that volume is above the recent trend shortly after this breakout occurs. Never pay more than 5% above the trend line. Additionally, familiarize yourself with your stock's thirty-day moving average volume, which you can find on most stock quote pages.

3. Quickly Sell if the Stock Falls Below the Trend Line: Be quick to sell your stock if it falls back under the trend line or breakout point. Generally, stops should be set at about $3 to $5 below the buy point. For more expensive stocks, a little more leeway is acceptable, but never more than a 2% stop loss. Some traders use a 5% stop loss rule. This may mean selling a stock that just attempted a breakout and failed, whether it's within 20 minutes or 3 hours of your purchase.

4. Take Partial Profits on Gains: Sell 20% to 30% of your position when the stock moves up 15% to 20% from its breakout point.

5. Hold Strong Stocks and Quickly Sell Weak Ones: Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly. Remember, stocks are only good when they are moving up.

6. Focus on Strong Groups of Stocks: Identify and follow strong groups of stocks, and try to keep your selections within these groups.

7. Be Aware of Market Sell-Offs: After the market has moved up for a substantial period, your stocks may become vulnerable to a sell-off, which can happen suddenly and dramatically. Learn to set new higher trend lines and understand reversal patterns to help with exiting stocks. Books on Candlesticks or the "Encyclopedia of Chart Patterns" by Bulkowski are recommended reading.

8. Volume is Key to Stock Movement: Volume drives stock movement. Start understanding your stock's volume behavior and how it reacts to volume spikes. These spikes are visible on any chart and are crucial for your stock's movement and success or failure.

9. Evaluate Before Buying on Mentioned Buy Points: Many stocks are mentioned in newsletters with buy points. However, just because a buy point is mentioned doesn't mean it's an automatic buy when that point is hit. Assess the stock's action and volume on the day when the buy point is hit, and take notice of the overall market environment before purchasing.

10. Avoid Using Margin Until Mastery is Achieved: Never go on margin until you have mastered the market, charts, and your emotions. Margin can wipe you out.