Stocks Trends Vs.
Trading Ranges
It is estimated that
stocks only trend about 30%
of the time. The rest of the
time they move sideways in
trading ranges. This is what
a trading range looks like:
Yeah, trading ranges can
get that sloppy! There is
absolutely no reason to
trade stocks that are
chopping around like that
when you can trade stocks
that are in the trending
phases. Trying to trade
stocks in trading ranges
(stage 1 and stage 3) is a
great way to chew up your
trading capital. Stick with
trends!
Here are some examples:
And now this one...
Which one would you
rather trade? Case closed! I
know all of this may seem
pretty basic but I can’t
tell you how many times I've
been in a stock trading
forum and Joe Trader says,
“I bought XYZ stock
yesterday at $32.57”.
So I go and look at the
chart and the stock is in a
steep downtrend! Or someone
says that they shorted a
stock at $52.03. So of
course I look at the chart
and the stock is in a
parabolic uptrend!
It just doesn't make
sense to trade that way.
If you look at any
stock on a chart that
is in a strong uptrend, you
will find that the pullbacks
are short lived. This gives
you a excellent opportunity
to buy the stock before it
resumes the uptrend.
Same thing with stocks in
downtrends. The rallies are
short lived which gives you
an excellent opportunity to
short them.
