Traders may think they know what the reaction will be to the announcement,
but until the markets digest the news, there is no way to be certain.
Entering positions before major market announcements is a sure way to
lose a lot of money. Now, many traders argue that if you try
and jump on the movement just after the announcement, you could make
lots of money since the price moves very fast. The truth is that by
the time you would get your order into the market and executed, you
could very well enter at the end of the move. Don't be so eager to
trade before or just after the announcements. Wait for your better
opportunity on the retest. You are a stock market speculator, not a
gambler. Knowing the trend and waiting to hit the buy button will make
you more money in the stock markets. Many times the stock will sell
off when news is released that is why it is better to wait to watch
the trend.
When it comes to entry points into a trade, most traders are
always looking for the entry to offer confirmation and very low risk.
The trap they run into is thinking they can have both at the same
time. It is about the supply and demand concept which offers the low
risk entry but gets you into the market before the big turn in price
happens, which means confirmation comes after entry, not at the time
of entry. Most traders are watching the indicators and oscillators
because they offer plenty of confirmation and that's fine if you use
them correctly. The issue is that many traders take each conventional
buy and sell signal an indicator produces and that can lead to
trouble. For those new to trading, the following information should
provide a good foundation and some structure when using indicators and
oscillators and how they work best with price.
For simplicity purposes, let's use CCI Commodity Channel Index to
explain some safeguards and rules, but be assured, these rules and
logic are equally applicable among most indicators and oscillators.CCI
attempts to measure the variation of a stocks futures price from its
statistical mean. High CCI values show that prices are unusually high
compared to average prices. Low CCI values show that prices are
unusually low compared to average prices. The CCI is an oscillator
that fluctuates between –100 and +100. Prices are considered
overbought when CCI moves into +100 territory. Prices are considered
oversold when CCI moves into –100 territory.
The CCI shows overbought and oversold levels of – 100 and
+100. CCI extremes correspond to turns in price as seen on the
candlestick chart. The turn in price in any market is where a trader
obviously wants to buy and sell. However, if trading were as easy as
taking these automated buy and sell signals, everyone would be making
easy money, but that's not how it works. When using an oscillator like
CCI or RSI, MACD, Stochastics, , it is important to take into account
two things Trends and Support (demand) and Resistance (supply).
One of the most important skills to develop in trading
consistently is the ability to be able to make a decision objectively
and unemotionally. We should never be in the situation whereby we are
saying to ourselves, "I am buying this because it looks like it's
going up;" rather, we should always have a clear and functional reason
to enter a trade that has been part of a disciplined and well-written
trade plan. The more reasons a trader looks for to enter a position,
the less likely they are to come to a quick and simple decision. Take
a look at different charts with a handful of Technical Indicators
applied, like Momentum, Fibs and Bollinger Bands or CCI.
Before confusing yourself with a plethora of fancy indicators
and patterns, you need to study and learn each one. When applied
correctly, support and resistance become the foundational tactic or
formation of the strategy and can get the charting process working in
the same way. Documenting the data of your trading is essential to
success. Also, it's of vital importance to track not only the
"mechanical data," the data of the actual trading execution entry,
targets, stops and exits , but you must track the "internal data" as
well, , what you are thinking, emotionally feeling, and the
unconscious beliefs. Actually, the internal data are directly
connected to the results that you get; that is, results are the
outcome of your thoughts, emotions and behaviors .
Your trading Journal and trade log work together to confront
weaknesses and consolidate strengths. As you consistently support
your effectiveness by building your strengths and by consistently
minimizing your weaknesses, you become more and more aligned so that
you can use all of your resources in the market. With experience, and
by increasing your capacity for internal alignment through journal
work, you are able to more accurately track the market movements. When
this happens, traders will see the order flow as it is and not as you
"wish" it would be.
The information of the Traders Journal and Trade Log provides a road map
and blueprint of where you want to go and what you want to build in
your trading so you can accurately see and participate in the order
flow without being overly influenced by emotional interference.
Emotions are an inextricable part of who we are as human beings. The
point is to understand more about them so they can be contained and
managed and used as an ally to boost the drive to stay on course. By
knowing your strengths and weaknesses as a trader, knowing the state
you want to achieve, and knowing you are on the path to getting there,
you close the gap between you and getting the results that you want.
After all making money is the goal of any successful stock trader.
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