Zanger’s Price/Volume Strategy
Dan Zanger is a well-known stock trader and author who has developed the a price/volume trading strategy. Dan Zanger strategy is based on the idea that the price and volume of a stock are two key indicators of its strength and momentum. Zanger first came to the attention of the media when Fortune magazine featured him the December 2000 issue. The featured article, “My Stocks Are Up 10,000%” told of his rags to riches story when this simple pool contractor, turned professional trader, turned $11,000 into $42 million within two years.
So how did he do it? In Zanger’s approach, he looks for stocks that are experiencing significant price and volume movements, with the goal of identifying stocks that are likely to continue to move in the same direction. He uses volume and chart patterns as the main criteria in stock selection. Some of the patterns he uses most are head and shoulders, cups and handles, rising and falling wedges, triangles, and flag and pennants.
In addition, Zanger looks beyond technicals to the fundamentals. Zanger looks for companies with rapidly increasing earnings, a new product or service, strong management and dominance in their market.
A typical day for Zanger is sitting in front of his six flat screen monitors watching the price and volume movements of the selected stocks that have passed his trading criteria. Zanger also spends a large amount of time on the phone with any one of his three brokers when any of the stocks on his watchlist are on the move.
A typical night finds Zanger scanning 1,400 stocks looking for the next days trading prospects. Using his strategy, Zanger has shown a knack for locating high-alpha stocks that lead the market, particularly during a major market move to the upside.
While Dan Zanger’s approach can be effective in generating profits, it requires a significant amount of time and effort to implement successfully, and it is not without its risks. Zanger places a strong emphasis on risk management, and he typically uses stop-loss orders to protect his positions from large losses. As with any trading strategy, it is important to thoroughly research and understand the risks and rewards before putting your money on the line.
Zanger’s final advice is “Trading for me is all about volume and price action. I buy on pattern breakouts when volume is rising, and as long as price is responding well to increasing volume, I stay on board. But when either price or volume stops rising, it’s time to get out.”
