So you have started to trade and you have developed your Stock Trading strategy . You’ve taken technical analysis training course and after some consideration you’ve deciding on trend trading for the style you prefer .
Trend trading is a strategy that is very attractive. Take a look at charts and you’ll see those trending patterns jump right out . You get excited about catching a trend in the beginning and then riding it out to its conclusion months later . The money beckons and sucess is before you !
Unforunately, in reality, trading isn’t that easy. You get in on a trend – you may be a bit late or you get in near the trend’s beginning , but in any case you are aboard . You are now in the trade and you’re able to get a small profit as you see the predictions you made come true. Then a strong day comes along and after that then the market stops dead in its tracks as the stock hits resistance . You just let yourself think there is more ahead and you can’t make the entire move in one day anyway and to your position you add. The market opens the following day, spends time going nowhere and then plunges south . Because you have added to your position you are quickly back at break-even and then you take a loss by the time you get your orders in place . What occured ? How could you have know beforehand that the trend wouldn’t go on and that you should have taken the profit when the market started strong and then paused ?
Here are several tips for trading that will help you tell when a trend is going to stop or continue on. If you use them with your technical analysis training you will be well ahead of the game .
First of all : go with higher time period charge when setting targets; look for logical areas of resistance and support to figure out where the market is going to stop or start moving .
If you can’t preduct areas of future resistance and support, or within your trading are unsure of how to coordinate your time frames , then you should look to a good technical analysis training course for more information. One of the best is Drummon Geometry but a variety of valid schools of thought exist .
Another element that is needed is a tool with which to make judgments about the strength and robustness of a trend . Trends that are strong will break through support or resistance and when a point or resistance or support is hit by a weak trend it will go into congestion or stop or it could start going in the opposite direction. If in the analysis tool kit you have the perfect tool you’ll be able to figure out which action is more probable ; if you do not have the tools then you have to wait and see , and there’s a good chance you’ll be disappointed .
To appropriately measure, momentum tools should be used and then apply them to a smaller timeframe then the one you are in … basically if the daily chart is what you’re trading , try to pick the low or the high with the trades , then to support the decisions you make intraday, you look at the hourly or half hour charts.
We will continue this discussion in the second part of this technical analysis training series.
