Explosive Strategy Course for Forex & Stock Market (11Hours)

If the trend is negative, you might consider shorting and do very little buying. If the trend is positive, you may want to consider buying with very little shorting. When the overall market trend is against you, the odds of having a successful trade drop.

Following these basic steps will give you an understanding of how and when to spot the right potential trades.

Controlling risk is one of the most important aspects of trading successfully. Short-term trading involves risk, so it is essential to minimize risk and maximize return. This requires the use of sell stops or buy stops as protection from market reversals. A sell stop is an order to sell a stock once it reaches a predetermined price. Once this price is reached, it becomes an order to sell at the market price. A buy stop is the opposite. It is used in a short position when the stock rises to a particular price, at which point it becomes a buy order.

There is an old saying on Wall Street: “Never fight the tape.” Whether most admit it or not, the markets are always looking forward and pricing in what is happening. This means that everything we know about earnings, company management and other factors is already priced into the stock. Staying ahead of everyone else requires that you use technical analysis.

Several indicators are used to determine the right time to buy and sell. Two of the more popular ones include the relative strength index (RSI) and the stochastic oscillator. The RSI compares the relative strength or weakness of a stock compared to other stocks in the market. Generally, a reading of 70 indicates a topping pattern, while a reading below 30 shows that the stock has been oversold. However, it is important to keep in mind that prices can remain at overbought or oversold levels for a considerable period of time.

The stochastic oscillator is used to decide whether a stock is expensive or cheap based on the stock’s closing price range over a period of time. A reading of 80 signals the stock is overbought (expensive), while a reading of 20 signals the stock is oversold (inexpensive).

Patterns

Several important patterns to watch for include:

• Head and shoulders: The head and shoulders, considered one of the most reliable patterns, is a reversal pattern often seen when a stock is topping out.
• Triangles: A triangle is formed when the range between a stock’s highs and lows narrows. This pattern often occurs when prices are bottoming or topping out. As prices narrow, this signifies the stock could break out to the upside or downside in a violent fashion.
• Double tops: A double top occurs when prices rise to a certain point on heavy volume, retreat and then retest that point on decreased volume. This pattern signals the stock may be headed lower.
• Double bottoms: A double bottom is the reverse of a double top. Prices will fall to a certain point on heavy volume and then rise before falling back to the original level on lower volume. Unable to break the low point, this pattern signals the stock may be headed higher.

Short-term trading uses many methods and tools to make money. The catch is that you need to (For additional reading, check out: >How to Start Trading.)educate yourself on how to apply the tools to achieve success. As you learn more about short-term trading, you’ll find yourself drawn to one strategy or another before settling on the right mix for your particular tendencies and risk appetite. The goal of any trading strategy is keeping losses at a minimum and profits at a maximum, and this is no different for short-term trading.