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.

Overbought/Oversold Overload

The best way to understand overbought or oversold markets is to study the nature of supply and demand. At any given moment, a finite pool of buyers and sellers is available to take action on a particular stock. The trading activity of this crowd usually stays within fairly narrow boundaries.

It's important to note that overbought/oversold markets are relative to a trader's time frame. Some reversals are simple pullbacks in the underlying trend, while others represent major market turns. It is vitally important for traders to define their holding period before reacting to short-term price swings. Major profits will be lost by planning the trade in one time frame but executing it in another...

Read More...