The 3-Day Rule: Essential for Stock Trading. // 3 day rule buying stocks


The 3-Day Rule: Essential for Stock Trading. // 3 day rule buying stocks, three day rule investing david moadel welcome to looking at the markets with
David Modell today I’m going to tell you about the three day rule this is a super
important rule now I like to buy great companies when they go down but you
don’t want to catch a falling knife because you’ll cut yourself right
meaning that you don’t want to buy a stock while it’s falling really fast you
want to wait until it’s done falling or at least done falling quickly and so the
way to help you with that is to follow the three day rule and that rule is
after a big drop in a stock wait at least three trading days not calendar
days okay three trading days for example if it’s Friday all right Saturday and
Sunday don’t count and so Friday Monday Tuesday Wednesday so if it’s Friday wait
until at least Wednesday for example three trading days wait three trading
days minimum before you buy it and you might even want to wait longer if it’s
still falling fast okay but I’m talking about minimum wait three trading days
here’s an example this is the daily candlestick chart each candlestick
represents one day of price action for AMD American microdevices now I believe
this is a great company and so I want to buy it when it when the price is low
when it goes down but I don’t want to catch a falling knife so here you can
see there was an earnings miss and the price of the stock went down a lot in
one day okay and you might have been tempted to buy it here but no don’t do
it follow the three day rule wait at least
three trading days before you buy it so let’s say this happened I don’t know
let’s just say it happened on a Thursday wait at least until remember it’s three
trading days so Friday Monday Tuesday wait until at least Tuesday before you
even consider buying it and even then only if if it’s not falling fast anymore
you know you want it to be going sideways or better yet going up a little
bit at least all right but you gotta weigh at least three trading days so
there was an earnings miss and the price went down a lot if you had bought here
if you had not followed the three day rule
and you would have maybe bought here and then it you would have been in trouble
because it went down down down over the next few days you might have alright you
might have bought it here okay you might have waited just one or two days and
bought it here because you’re thinking well there’s a support line here look it
bounced off of this line several times before but again you should have waited
at least three trading days all right so that’s AM D let’s look at some other
examples by the way when a stock misses earnings
and goes down a lot and then continues to go down the next few days after that
that’s called post earnings drift meaning that after earnings the stock
price will probably not always but oftentimes will continue going in the
same direction as it did on on the earnings alright so if it goes down a
lot then it’ll probably not always would probably continue in that same direction
at least for a few days that’s called post earnings drift and it works not
only to the it’s true usually not only to the downside but also to the upside
let’s look at an example of Netflix alright we have an earnings beat here
it’d be earnings Netflix so it went up a lot that day and look there’s post
earnings drift to the upside over the next few days it kept going up in the
same direction not as fast but it started to slow down going up but it did
keep going up so you don’t want to fight that either all right so here’s Twitter
and here’s another example of post earnings drift alright it had an
earnings beat okay way up there and then the next day kept going in the same
direction very strongly look at that big candle there alright so post earnings
drift works in both directions alright but again I like to buy really great
companies when they go down so United United Continental Holdings alright
that’s an airline stock and I like the company so I like to buy it when it’s
cheap here’s an earnings miss you have big red candle there okay it went down
to down all right and then if you had
jumped the gun and not followed the three-day rule and waited at least three
trading days before you even consider buying it it just kept going down over
the next few days and actually over the next several weeks it kept going down
all right so there’s a good example here’s another good example same stock
another earnings miss here miss turnings went down and then if you had not waited
at least three trading days look what happened the next day big red candle
down okay you would have gotten hurt there so make sure that you wait at
least three trading days before you consider jumping into a stock that has
gone down a lot not just because of earnings these were all earnings misses
these examples and earnings beats but if a stock moves in a particular direction
really fast for any reason it could be maybe it goes down not just because of
earnings but because of you know a scandal happened or whatever okay or
just bad news wait at least three trading days wait for investors to calm
down wait for analysts to stop downgrading the stock all right and just
wait for the bleeding to stop in the stock before you even consider jumping
in with a long position so that’s the three-day rule it’s really important and
I just wanted you to know about that so you don’t get hurt so if you like this
video if you found it useful please give it a thumbs up on YouTube and leave a
comment in the comments section below this video and if you have not done this
already please subscribe to my youtube channel so you can receive the latest
updates on my educational videos and if you’d like some assistance with putting
together a trading plan or with candlestick charts or trading or
investing my name is David Modell and you can email me anytime at David Modell
at gmail.com thank you so much for watching and listening and I’ll talk to
you again soon you

38 Replies to “The 3-Day Rule: Essential for Stock Trading. // 3 day rule buying stocks”

  1. Thank you David ~! When the MJ stocks went down recently, (big time) I didn't wait the three days. Most of the stocks were recovering very quickly! So I bought, and for the most part all is working out fine ~ For other stocks, I will most certainly use the three day rule ~ It makes complete sense .

  2. Good rule, If I had jumped cohr at 250 I'd be cut a while. It is one of the highest gainers and still getting cut back. Caught one at tip I am just waiting to sell….within 3 days LOL! not the same market now things have changed I think.

  3. Thanks for this concept, seems to be a very good general rule. Could something similar be applied to volaility-spikes (when start going short again)?

  4. People have a hard time maintaining focus over a period of time. Following this rule allows one to practice staying focused over a period of time. There is such an immediate gratification thing in our culture. Take $INSY for example. When the CEO got arrested it tanked. People were scrambling to buy it on Stocktwits and acting like they had to buy now or miss the boat. It drifted lower for a while… but then did turn around…

  5. Hello David it is me once again. The story wasn't over yet. In good conscience , and for your subscribers, I need to re comment, on my original one. I purchased MJ stock, last Monday. Today most of them went down (four days later) I was impatient and wanted to buy back in. As you say David, "Wait at least three days, even longer before buying back in." with this in mind, now that I know your 3-Day Rule, has been proven beyond a doubt, I will remember it, and practice this rule alway's. It was my impatience, (the devil) made me do it πŸ™‚ You can go ahead and say "I told you so" lol, because you are right. Thank you again ~

  6. 1 ADVANCED micro devices…. not american 2 they beat earnings not missed the dumbass CEO said they would never have a quarter that strong again and thaty caused a panic sale. i was in the stock and on the conference call

  7. you might also mention the main driver of the 3 day rule, which is pretty simple: margin calls. so many traders trade on margin. with a big move, they receive margin calls from their broker. they sometimes have as much as 3 trading days to settle. this works both ways long and short. it may also be the driver behind an ABC move, the C being the last holdouts settling their margin calls.

  8. Thank-you Ma-sterπŸ™πŸ‘πŸ‘ŒπŸ¦‡πŸ€‘πŸ¦‡πŸ˜ŽπŸ€£πŸ¦‰πŸ£πŸ•ŠοΈπŸ»πŸ₯‚πŸ•ΊπŸ’ƒπŸ˜˜πŸ˜πŸ•ŠοΈπŸ•ŠοΈπŸ•ŠοΈ
    Thank-you WEED

  9. Your presentation is very clear and helps me a lot to understand it quickly…Thank you Mr. David Moadel..

  10. Hello David. I have been watching your videos for a few days. I really like your presentation and how informative and easy to understand you are. Keep up the great work and God bless.

  11. David: You seem to be a nice guy. You are really upping your video count/views with the upping of your picture-bait which does help. You know how to market. You know your stuff. I thought I would be initially entertained by one of these voluptuous voluminous models in the picture.

  12. I wish I watched this video couple of months ago when I just started trading! I wouldn't make those few mistakes I made which I try to correct now. Great video, love the way Dave explains everything, pretty simple and straight forward, not like many other boring videos on Youtube.
    I guess I am becoming a fan and planning to watch all his videos posted. Thanks again, Dave!

  13. What is great is that you are successful but speak to us respectfully and clearly, rather than as an egocentric superstar. Normal is beautiful. Thanks, David!

  14. Thank you so much for this video. I'm a new investor only 3 weeks experience but I learned a lot with this video. I already suffered by not knowing this rule lol thanks! I will be emailing you some questions.

  15. Hi David, thank you for this great gesture of bringing out these awesome trading videos, I only watch your videos now. In this video it says prices drift for days after a gap but in the morning gap strategy video it shows stocks will usually return back to the previous day closing, this is somewhat unclear to me. Thanks

  16. Excellent info, thanks for posting! These are the kind of tips that can give the small investor a bit of an edge. If I had been aware of this I'd be much farther along by now, and my very slow growing account (if and when it grows at all!) would be at least twice as large these days. How many times when trades are going down have I wished I just used the simple old buy and hold strategy, at least it will normally grow by a little over the weeks and months.

    Catching those damned 'falling knives' gets extremely painful when bargain hunting lol!

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