Contact Us
Your Cart
Your Account
Categories:
  
Links:

Trading Basics
Learn Swing Trading
Stock Market Stages
Trading Stock Trends
Moving Averages
Candlestick Charts
Stock Chart Volume
Support & Resistance
Relative Strength
The Strategy
Trading Strategy Traders Action Zone
Trading Pullbacks
Entries and Exits
Market Timing Strategy
Chart Patterns
Money Management

Trading Stock Trends

Why You Should Trade Trending Stocks

To consistently make money in the stock market, you only want trade stock trends! But what are the characteristics that make up a trend? I thought you would never ask.

Remember when we talked about stock market stages?

Well Stage 2 is an uptrend that is characterized by a series of higher highs (HH) and higher lows (HL).

Stage 4 is a downtrend that is characterized by a series of lower highs (LH) and lower lows (LL).

This creates a series of peaks and troughs on the chart that you can trade quite successfully.

Below is the the beautiful anatomy of stock trends:

stock trends diagram

Stocks Trends Vs. Trading Ranges

It is estimated that stocks only trend about 30% of the time. The rest of the time they move sideways in trading ranges. This is what a trading range looks like:

trading range diagram

Yeah, trading ranges can get that sloppy! There is absolutely no reason to trade stocks that are chopping around like that when you can trade stocks that are in the trending phases. Trying to trade stocks in trading ranges (stage 1 and stage 3) is a great way to chew up your trading capital. Stick with trends!

Here are some examples:

chart of trend

And now this one...

chart of trading range

Which one would you rather trade? Case closed! I know all of this may seem pretty basic but I can’t tell you how many times I've been in a stock trading forum and Joe Trader says, “I bought XYZ stock yesterday at $32.57”.

So I go and look at the chart and the stock is in a steep downtrend! Or someone says that they shorted a stock at $52.03. So of course I look at the chart and the stock is in a parabolic uptrend!

It just doesn't make sense to trade that way.

If you look at any stock on a chart that is in a strong uptrend, you will find that the pullbacks are short lived. This gives you a excellent opportunity to buy the stock before it resumes the uptrend.

Same thing with stocks in downtrends. The rallies are short lived which gives you an excellent opportunity to short them.


Basket:
Your Cart is Empty

News:
10/29/2008
The Five Most Reliable Candlestick Patterns
9/28/2008
How To Read Charts
More... 
     
Articles
How To Start Trading Options
Dividen Calendar
Trading Journal
24 Rules of Trading
How To Scan For Stocks
How To Read Charts
How to Trade Gaps
Multiple Time Frames
How to Short Stocks
Fibonacci Retracements
Stock Trading Lessons
Trading with TICK & TRIN
List Sectors & Stocks
Tools of the trade
Master Bollinger bands
Audio Webcast Course
Position Sizing Calculation
Option Strategies
Option Playbook
FOREX
ForexFreedom formula Video
Money Management Video
REAL ESTATES
REO Listings for Bank
Buying REO property
Get Free Credit Reports
find your home value

Submit Your Site To The Web's Top 50 Search Engines for Free!



Powered by D2 StoreFront.


free spam filter

Page Rank Checker | The Link Exchange