How To Win At The Stock Market
Most amateurs get killed in the stock market when double bottoms and double tops form. I am going to show you how to beat the professional traders at their own game.
Every bull run in the stock market hits a level where longs start taking profits because the stock has run up too far too fast. When longs take profits, charts top out when the money from new longs is not enough to replace what was taken out.
Traders who just bought the stock are pissed off because they came to late. They are trapped, sometimes even in a Bearish Island Reversal. Should they just stay in the stock and hope it comes back or sell for a loss? Well, the stock will keep dropping until enough bulls decide that the stock has over extended itself on the downside. So as more and more of these bulls step in, the stock begins to rise and the rally continues. Now when the stock finally rises back up to its previous high, you can expect sell orders to hit the market as those who were trapped exit their positions.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
At a market bottom, bears start covering their short positions when a new low is formed. Once the rally from short covering ends and the stock continues to fall, the question becomes will the previous low hold. If bears (fear) are stronger than bulls (greed), prices will fall below the previous low and the downward move will keep on going. If bears are weaker than bulls, the downward move will stop near the previous low and create a double bottom bounce. Use your other favorite indicators to decide which of these events is more likely to happen.
Any time you see a stock rise to its previous peak, the main question in your mind should be will it rise to a new high or form a double top and turn down. Technical indicators like volume, MACD, RSI, and stochastics can be a great help in answering this question.
If a stock climbs to its previous high, if the volume, MACD, and stochastics are dropping then a double top is likely to form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23305
Every bull run in the stock market hits a level where longs start taking profits because the stock has run up too far too fast. When longs take profits, charts top out when the money from new longs is not enough to replace what was taken out.
Traders who just bought the stock are pissed off because they came to late. They are trapped, sometimes even in a Bearish Island Reversal. Should they just stay in the stock and hope it comes back or sell for a loss? Well, the stock will keep dropping until enough bulls decide that the stock has over extended itself on the downside. So as more and more of these bulls step in, the stock begins to rise and the rally continues. Now when the stock finally rises back up to its previous high, you can expect sell orders to hit the market as those who were trapped exit their positions.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
At a market bottom, bears start covering their short positions when a new low is formed. Once the rally from short covering ends and the stock continues to fall, the question becomes will the previous low hold. If bears (fear) are stronger than bulls (greed), prices will fall below the previous low and the downward move will keep on going. If bears are weaker than bulls, the downward move will stop near the previous low and create a double bottom bounce. Use your other favorite indicators to decide which of these events is more likely to happen.
Any time you see a stock rise to its previous peak, the main question in your mind should be will it rise to a new high or form a double top and turn down. Technical indicators like volume, MACD, RSI, and stochastics can be a great help in answering this question.
If a stock climbs to its previous high, if the volume, MACD, and stochastics are dropping then a double top is likely to form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23305
About the Author:
Written by Sean Phelps. I hope this article makes you a ton of money. For more FREE cash pulling secrets go to the wildly popular stock trading blog on the Internet by going to stock market
posted by Mr. Forex at
11:20 AM
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