So you are starting out in trading and you have a strategy for stock trading that is your own. You have gone through technical analysis training course and and for your preferred style you have gone with trend traing after some time in thought.
You'll definitely find trend trading a strategy that is attractive . Take a look at charts and you'll see those trending patterns jump right out . You salivate about catching a beginning trend and riding on through the conclusion of the trend many months in the future. The money beckons and sucess is before you !
Trading isn't so easy in reality . You get in on a trend - you get in near the beginning or a bit late, but in any case you are aboard . As your predictions begin coming true and you are in this trade, you get a small profit . Then you have a strong day 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 then you add to the position you are in . But alas the following day the market opens up , goes nowhere for a while and then quickly heads south . Since you've added to the position you were in you head back to break even fast and then you take a loss by the time you get your orders in place . What occured ? How could you tell before it happened that the trend wouldn't continue and that the profit should have been taken when you saw that pause after the strong open?
Here are several tips for trading that will tell when a trend will stop and when it will continue . If you apply these to your technical analysis training you'll be a step ahead of everyone else .
First and most importantly : go with higher time period charge when setting targets; look for areas where resistance and support are logical to figure out where the market is going to stop or start moving .
If you are not sure how you can predict where support and resistance will exist in the future , or are uncertain how to coordinate time-frames in your trading , then you should look to a good technical analysis training course for some help . You'll find Drummond Geometry to be a top option but many different valid schools or thought are out there.
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 a weak trend will stop and either go into sideways congestion at a point of resistance or support or it could reverse course . If your analysis tool kit has the right 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 the possibility of being disappointed is high .
To appropriately measure, momentum tools should be used and apply the tools to a timeframe smaller than that of the trend you are currently trading ... basically if the daily chart is what you're trading , with your trades try to pick the day's high or low, then to support the decisions you make intraday, you look at the hourly or half hour charts.
More information will be discussed in part 2 of the technical analysis training series.
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