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Understanding Trade Stock Trends and Why You Need Them in Your Investments

  • September 27th, 12:55
  • Last Updated: January 3rd, 01:37

In order to be a really successful stock market trader and make money consistently, you need to be able to identify and take advantage of stock trends. The problem is that identifying them is difficult. A trend is made out of several characteristics, all characterized by market stages.

2 of the really useful stages are 2 and 4. In Stage 2 we have an uptrend that is mainly characterized by higher highs (referred to as HH) and higher lows (referred to as HL). Stage 4 stands out as a downtrend that is mainly characterized by having series of lower lows (referred to as LL) and lower highs (referred to as LH). You can easily look at the graphs and identify these trends.

Trending Ranges And Stock Trends

According to estimates, stocks will just trend around thirty percent of the time. When a stock does not trend, it will move sideways, going through trading ranges. In this case it is tougher to make money simply because highs and lows are not actually easy to predict or control.

In 70% of cases trading ranges are really sloppy. Trading stocks that are simply chopping around, going up and down without an easy way to predict movement is a really bad idea. Your trading capital will be depleted whenever you want to use stage 1 and stage 3 trading ranges. Sticking to stock trends is the smartest thing you can do.

There are way too many individuals out there that make mistakes and do not actually understand why they are losing money. Keep in mind that various things that happen in the industry do not guarantee that a stock will go in an upward trend. For instance, if Bobby Kotick were to assume a role in another company and leave Coca Cola, there is no guarantee that we would have a downward trend.

Trendlines are obviously really important for a stock trader and many specialists spend a lot of time trying to come up with great ways to make money on the long run. This is where the trends come up as a really serious helping hand. At the same time, some try to make money really fast. When you want to make money really fast, there is a huge possibility that you will end up faced with the unwanted situation in which you lose a whole lot of money as something unexpected happens with the evolution of the stock.

When you see a chart for a stock that has a very strong uptrend, pullbacks will be short lived. With the alternative you do not have such an advantage. The uptrend stock will always stand out as a great opportunity to buy stock before you see an uptrend resuming. As you have stocks that are on a down trend, rallies will be short lived and short term opportunities are always excellent.

Many beginners make the mistake of not being focused on the long term profit. It is vital that you focus on what will bring in the most money on the long run while not thinking that much about the short term huge profits that sometimes happens.

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