There are several successful ways to trade the stock market.
Breakouts, pullbacks, trend trading, counter trend trading and more.
Tonight we want to touch on a style that we never use in our swing trade or long term portfolios but is often used in our radio broadcast.
Mike Serven hosts our radio day trade show and he has a style that is quite opposite our normal style of "trading with the trend".
We feel we should explain the difference due to some email from members who are confused about the two contradictive styles.
Mike has been successfully day trading his style and decided to take it to the airwaves.
I've never been successful trading against the trend so I don't do it.
However, that does not mean trading against the trend isn't a successful approach to trading.
The style of trading that is used on the radio broadcast is Mike's style.
The strategy requires trading opposite to natural bias.
It requires taking positions near pivot points that are at resistance or support and assuming a stock will reverse direction at these key pivot levels as opposed to breaking out.
The hope is that a counter trend reaction will develop and the stock price reverses resulting in a profitable trade.
This aligns trading positions against the dominant trend and assumes that a counter trend is about to start.
It also sets up the position against the current crowd emotion and momentum.
The entries make sense for a number of reasons: - This resistance/support is where the natural profit taking urge will take place causing a reversal in the stock.
The position to be in here is to sell short at resistance if you think the price will have trouble getting through resistance and reverse.
Or get long at support if you feel support will hold and the down trending stock will reverse and move higher.
- Stocks normally fall faster than they go up so selling short at resistance could result in a quick profit.
- Selling short at resistance or going long at support carries good risk reward.
The downside should be minimal if you enter a long position at support because your stop loss price will be set just under this key support level you see on the chart.
If the trade doesn't work, you will be out with minimal loss.
When shorting resistance, your stop is placed just above resistance so that if the stock breaks out instead of reversing, you will be out of the trade with minimal loss.
These trades can work as long as you have a stop in place.
If you have no stop, the accelerating momentum can eat you alive if the support and resistance levels give way to a price breakout/breakdown.
There is no right or wrong style.
It all depends on what works for each individual trader.
If Yogi Berra was a stock trader, he might say something like this "Every trading style is right but they may not be right for everyone.
" Copyright © 2008 StockTradersHQ.
com
Breakouts, pullbacks, trend trading, counter trend trading and more.
Tonight we want to touch on a style that we never use in our swing trade or long term portfolios but is often used in our radio broadcast.
Mike Serven hosts our radio day trade show and he has a style that is quite opposite our normal style of "trading with the trend".
We feel we should explain the difference due to some email from members who are confused about the two contradictive styles.
Mike has been successfully day trading his style and decided to take it to the airwaves.
I've never been successful trading against the trend so I don't do it.
However, that does not mean trading against the trend isn't a successful approach to trading.
The style of trading that is used on the radio broadcast is Mike's style.
The strategy requires trading opposite to natural bias.
It requires taking positions near pivot points that are at resistance or support and assuming a stock will reverse direction at these key pivot levels as opposed to breaking out.
The hope is that a counter trend reaction will develop and the stock price reverses resulting in a profitable trade.
This aligns trading positions against the dominant trend and assumes that a counter trend is about to start.
It also sets up the position against the current crowd emotion and momentum.
The entries make sense for a number of reasons: - This resistance/support is where the natural profit taking urge will take place causing a reversal in the stock.
The position to be in here is to sell short at resistance if you think the price will have trouble getting through resistance and reverse.
Or get long at support if you feel support will hold and the down trending stock will reverse and move higher.
- Stocks normally fall faster than they go up so selling short at resistance could result in a quick profit.
- Selling short at resistance or going long at support carries good risk reward.
The downside should be minimal if you enter a long position at support because your stop loss price will be set just under this key support level you see on the chart.
If the trade doesn't work, you will be out with minimal loss.
When shorting resistance, your stop is placed just above resistance so that if the stock breaks out instead of reversing, you will be out of the trade with minimal loss.
These trades can work as long as you have a stop in place.
If you have no stop, the accelerating momentum can eat you alive if the support and resistance levels give way to a price breakout/breakdown.
There is no right or wrong style.
It all depends on what works for each individual trader.
If Yogi Berra was a stock trader, he might say something like this "Every trading style is right but they may not be right for everyone.
" Copyright © 2008 StockTradersHQ.
com