Charting at Support Resistance levels tend to be more predictive in nature
and usually do not identify levels where price has already been. These
predictive levels usually arrive from analysis of current price action
to predict future price levels. You need to learn and use reliable
chart indicators. Chart patterns fall into one of two categories,
continuation or reversal.
Continuation patterns usually involve consolidation of price into a
channel, or triangle, and mark a pause of a powerful trend. Instead of
reversing, the trend rests before proceeding. In a reversal pattern,
you are seeing the exhaustion of a trend and the start of either a
correction or new trend in the opposite direction. Before attempting
to trade any of these patterns, I recommend you gain the knowledge and
experience necessary to properly identify, plan and execute trades on
them. Types of analysis you need to learn are:
Fibonacci levels
Floor Trader Pivots
Diagonal Trend lines
Moving Averages
Market Profile levels
Both of these proactive and reactive levels have merit and are usually the
most dominant part of a trading strategy. You should learn a couple
and stick with these chart indicators. Don't get bogged down trying to
learn to many stock market indicators.
This same scenario applies to demand lines weather you trade
stocks or the forex market. When you look at your chart levels, just
look left and ask yourself "If traders wanted to buy at this level,
have they already had an opportunity?" If so, there is a very good
chance you are trying to look through a Wall.
The same principles work for selling at the origin of a
downtrend. You can see many supply levels in the downtrend, however,
the origin of a move will offer the best opportunity for shorting. In
the chart below, you see I have selected two gaps for the origin of a
move. The first gap started a move to the downside and was a gap and
go. When price returned to this level, it offered an excellent
opportunity for shorting the stock.
So traders would do well to be patient for their entries and
look to the return to the origin of a move for the best entries. This
is how you become a profitable trader.
The basic principle of buying low and selling high is how we
derive profit when buying and selling stocks or trading the futures,
forex markets. Traders can offer a lower price and typically
end up somewhere in the middle. Smart investors look for deals where
they can buy what they are looking for at a lower price than others
pay. We all typically try or desire to buy at "wholesale" prices.
Most of you are thinking that I am wasting your time because you know
this already and that's true; everyone applies this smart buying and
selling action in every part of your trading history.
However, during the years that we are conditioned to buy low
and sell high, we are almost taught to take the opposite action with
our investments either long term or in short term trading. When
traders experience fear and take action in the markets, the
overwhelming majority sell and this is almost always the opposite
action you should take. large selling brings prices down to deep
discount demand levels and when the last seller sells at price levels
where more willing demand exceeds willing supply, price then rallies
strong because you have no more sellers.
Some stock market traders can see this very well, but apply
it to doom and gloom scenarios thereby ensuring the negative outcome
or having a losing trade. You need put to use an enormously effective
charting tool for not only catapulting trades to achievement by
harnessing your profits and using them deliberately, but as well when
you stick with your trading plan and chart indicators at supple and
demand levels you will be more successful. |
