Trading Stocks

So how does a new trader begin to understand the basics of the current market trend? First, try with these few basic guidelines that hold true at any experience level. Moving averages are always a good guide to use to help you establish the current trend. Are the 20 and 40 rising or falling? Are we above or below the 200? Is the 20 above the 40? Is the 40 above the 200? Are we in a pattern of higher highs and higher lows or are they starting to even off showing the potential for a base to form?

Many traders like to be market "gurus" and nail every twist and turn in the market. But a wiser choice is to follow a plan, play proven strategies, and always keep a close eye on what the market has done to help you determine your best course of action in the future.

Bottoms: Adam & Eve & Adam

Eve's rounded bottom takes longer to form than the sharp Adam spike. Look for volume to decrease as the stock heals and prepares for a new uptrend. Adam and Eve formations aren't limited to bottoms. Watch for them at the end of parabolic rallies.

Eve and Adam formations rarely appear but are highly profitable when they do. The emotional shift within the crowd from extreme negative to extreme positive ignites fits of buying, powering a stock out of its bottom.

The Adam and Eve Reversal demonstrates the importance of the center peak in the formation of Double Bottoms. A very sharp and deep first bottom on high volume (Adam) forms this DB pattern. The stock then bounces high into the center retracement and develops a longer and more gentle, rolling second bottom (Eve) on relatively low volatility. Price action then constricts into a tight range and the stock breaks strongly to the upside.

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