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The trend is your friend
Not sure what that means?
Let me give you a lesson on
"Trend Trading Made Simple"
- A Thread -
Not sure what that means?
Let me give you a lesson on
"Trend Trading Made Simple"
- A Thread -
1.
Knowing the overall trend of the stock you're looking to buy is important
New traders like to buy "cheap" stocks because "it has to go back up"
That's not always the case
Cheap stocks are cheap for a reason...
Knowing the overall trend of the stock you're looking to buy is important
New traders like to buy "cheap" stocks because "it has to go back up"
That's not always the case
Cheap stocks are cheap for a reason...
2.
- 200 Simple Moving Average (SMA) -
This is the first thing I always look at
With it we can see the overall movement of a stock over the last 200 days
If a stock is trading below this level I will avoid no matter what...
- 200 Simple Moving Average (SMA) -
This is the first thing I always look at
With it we can see the overall movement of a stock over the last 200 days
If a stock is trading below this level I will avoid no matter what...
3.
We want to focus on buying strong stocks
A stock that is below is 200 SMA is one that has been "forgotten"
Can the stock rise in price?
Sure can, but I'd rather buy when it's ready to go up vs tie my money in a stock that isn't doing anything now
We want to focus on buying strong stocks
A stock that is below is 200 SMA is one that has been "forgotten"
Can the stock rise in price?
Sure can, but I'd rather buy when it's ready to go up vs tie my money in a stock that isn't doing anything now
4.
Next you need to know what stage the stock you're looking to buy is in
The four stages are:
- Neglect (consolidation)
- Rising (buying)
- Topping (selling)
- Declining (capitulation)
Next you need to know what stage the stock you're looking to buy is in
The four stages are:
- Neglect (consolidation)
- Rising (buying)
- Topping (selling)
- Declining (capitulation)
5.
- Consolidation -
This is a period of time where the stock isn't doing much
It is simply moving sideways
This may be because the company has released lackluster earnings
You'll want to avoid buying as the stock won't be doing much for you..
- Consolidation -
This is a period of time where the stock isn't doing much
It is simply moving sideways
This may be because the company has released lackluster earnings
You'll want to avoid buying as the stock won't be doing much for you..
6.
- Buying -
Stage 2 usually comes as a surprise to many
It can be events such as:
- New CEO
- Stellar earnings
- Regulations in their favor
At this point we want to own shares of the company (with the proper entry points of course)
- Buying -
Stage 2 usually comes as a surprise to many
It can be events such as:
- New CEO
- Stellar earnings
- Regulations in their favor
At this point we want to own shares of the company (with the proper entry points of course)
7.
- Selling -
"It'll go to the moon!"
Yeah it doesn't work like that
At some point it will be hard to sustain the move higher
A huge reason is that the smart buyers have sold shares on the way up
While those who missed the move up (called weak hands) now want to join in
- Selling -
"It'll go to the moon!"
Yeah it doesn't work like that
At some point it will be hard to sustain the move higher
A huge reason is that the smart buyers have sold shares on the way up
While those who missed the move up (called weak hands) now want to join in
8.
Weak hands tend to sell on the first pullback since they bought at such a high price (usually because they think the stock can keep going)
This causes the stock to fall even further...
Weak hands tend to sell on the first pullback since they bought at such a high price (usually because they think the stock can keep going)
This causes the stock to fall even further...
9.
- Capitulation -
At this point the company has lost its upward momentum
It is now near its 52 week lows as well
This can be a result of:
- Bad news
- New competition
- Negative earnings surprise
- Capitulation -
At this point the company has lost its upward momentum
It is now near its 52 week lows as well
This can be a result of:
- Bad news
- New competition
- Negative earnings surprise
10.
Knowing what stage your stock (& where the 200 SMA is) is essential as a trader
We're not looking to hold a stock long term (unless we're making money)
Your best bet is to find a stock looking to break stage one
Do this and you will be a better as a result of it...
Knowing what stage your stock (& where the 200 SMA is) is essential as a trader
We're not looking to hold a stock long term (unless we're making money)
Your best bet is to find a stock looking to break stage one
Do this and you will be a better as a result of it...
Before you go...
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Have you checked out my investing newsletter?
Over 95 people have subscribed for their weekly edition
I'll send you last weeks copy for free
Send me a DM!
(ps. The Big Picture is 25% off all weekend, just DM me!) https://gum.co/elIOM
