It was a light volume, holiday-shortened week for the markets the past week, and the S&P 500 stayed within its tight trading band of 1,083 and 1,112. The lower end of the trading band is also where the 32-day moving average coincidentally comes up. Click here for a tutorial on how moving averages come into play in stock trading.
Momentum trading is probably the most mainstream of all swing trading strategies. This is because it works best during bull markets, and history is riddled with longer durations of bull markets than bear. It's also the easiest to execute and pivot points are the easiest to identify visually.
The simplest trading strategy that I can teach newbie traders is using moving averages. I teach this strategy whenever I encounter people who don't have the time to monitor markets too closely and have limited background on technical analysis. This can work for the fundamentalists who don't have the time or experience to scrutinize the charts but still believe in technical analysis.
The most important lesson I've learned in my 10-year trading career is this: Do not tell the market what it's supposed to do; instead, let the market tell you what it is going to do. It's easier said than done. Most people put their ego and convictions ahead of prudent risk management, investment flexibility and a true assessment of market conditions.
When markets are at critical junctures, like when it is churning at or near resistance (or support) and volatility will be the environment for the next few days (before the market decides to reverse or continue on its current direction), swing traders like me have three options: 1) reverse your trading bias from long to short or vice-versa; 2) stay out of the market if you feel the underlying bigg
As much as you should be aware of target prices where you decide to lighten up/sell your stock trading positions when you are ahead, you should be aware of price levels where you "throw in the towel". This price level is what we call a stop-loss. As traders, we have limited capital and allowing it to deteriorate is a big no-no.
Stock Trading Strategy: Support/Resistance or Range Trading
In this post, we will discuss the Support/Resistance or Range Trading Strategy. The first thing you need to know is when to apply this strategy. You apply this strategy when you have confirmed that the stock has entered a range/consolidation. This is also known as an area pattern.