Web Exega

Anxiety - Anxiety, Depression and ADHD related information. Free Web and Internet Directory Free Web and Internet Directory Affordable Web Hosting Affordable Web Hosting Mortgage Calculator Home Loan Mortgage Calculator The eBay Song Loans Advertise here Affiliates Reviews Help Youth Defeating Stigma structured settlement news DIRECT TV

TREND AND TRADING RANGE

Next articles: ANXIETY - Olive experiences constant anxiety regarding her children... What is Abuse - There are many ways to abuse. To love too much is to abuse. It is tantamount to treating someone as an extension, an object, or an instrument of gratification. To be over-protective, not to respect privacy, to be brutally honest, with a sadistic sense of humour, or consistently tactless – is to abuse. The Myth of Mental Illness - Descriptive criteria aside, what is the essence of mental disorders? Are they merely physiological disorders of the brain, or, more precisely of its chemistry? What is Narcissism - Narcissism is a pattern of traits and behaviours which signify infatuation and obsession with one's self to the exclusion of all others and the egotistic and ruthless pursuit of one's gratification, dominance and ambition. Personality Disorders - Axis II personality disorders are deeply ingrained, maladaptive, lifelong behavior patterns.

Traders try to profit from changes in prices: Buy low and sell high, or sell short high and cover low. Even a quick look at a chart reveals that markets spend most of their time in trading ranges. They spend less time in trends.

A trend exists when prices keep rising or falling over time. In an uptrend, each rally reaches a higher high than the preceding rally and each decline stops at a higer level than the preceding decline. In a downtrend, each decline falls to a lower low than the preceding decline and each rally stops at a lower level than the preceding rally. In a trading range, most rallies stop at about the same high and declines peter out at about the same low.

A trader needs to identify trends and trading ranges. It is easier to trade during trends. It is harder to make money when prices are flat unless you write options, which requires a special skill.

Trading in trends and in trading ranges calls for different tactics. When you go long in an uptrend or sell short in a downtrend, you have to give that trend the benefit of the doubt and not be shaken out easily. It pays to buckle your seat belt and hang on for as long as the trend continues. When you trade in a trading range, you have to be nimble and close out your position at the slightest sign of a reversal.

Another difference in trading tactics between trends and trading ranges is the handling of strength and weakness. You have to follow strength during trends - buy in uptrends and sell short in downtrends. When prices are in a trading range, you have to do the opposite - buy weakness and sell strength.

From Trading for a Living, by Alexander Elder (Page 80)

Link to this article, just copy and paste following code: <a href=http://www.exega.com/article9.html>TREND AND TRADING RANGE</a>

Article viewed 704 time(s). Read more:

1 | 2 | 3 | 4 | 5 | 6 | 7 |