Every successful stock market trading system is comprised of three critical elements. In this article, we will examine the first of these components. As with anything that is to be constructed in a robust manner, the first part of a trading system is its foundation.
Most stock traders and investors spend the majority of their time studying the daily action of equities. They closely watch the price action on daily charts. This is perfectly fine if you are built your foundation first. And the foundation is the prevailing trend of the stock you are watching.
The very first chart you should look act are those that depict the long range price action of your stock. When we say long range, we are talking about looking at charts that span one year or more. Do not look at daily price action, look instead at weekly price action. Use a trend following tool such as either moving averages or a MACD histogram to tell you whether you should buy or sell the stock.
Probably the easiest way to do this is to plot 20, 50, and 100 period moving average lines on the chart. When the lines are layered probably to support a bullish or bearish trend, then you will know whether this stock is a potential buying opportunity or a selling short opportunity. If you are fairly new to trading, it is recommended that you stay away from sell stocks short as this is a totally different animal than buying stocks.
Now that you have built the foundation of your trading system, you will be ready for Part 2. However, do not take any action until adding parts 2 and 3 to your trading system.
Source : azinearticles
No comments:
Post a Comment