Most people get into stock trading as a way of diversifying their investment portfolio. When you do stock trading in the right way, you will be in a position to do more than just make some extra cash, and you could, in fact, become a millionaire. However, to get to this point, you need to learn about stock trends and always make sure that you have an idea about what could happen in the future. The easier you can keep up with the trends, the more beneficial stock trading will be for you. Here are the rules to follow when making predictions.
Understanding data points and direction
When studying trends, you always have to ensure that they have at least three contact points. Of a trend only has two or less contact points, you are likely to lose if you follow the trend or make predictions based on it. When it comes to direction, it is possible to have a chart moving in any direction that you want, as long as it allows for the appearance of all types of trends on the same chart. At the same time, think carefully about the slope of the trend. If the slope is too sharp, it is less likely to be sustainable. On the other hand, when a trend is too flat, it may not have the necessary predictive powers.
The importance of time in trends
The validity of a trend relies heavily on time. Capitalize more on monthly time series because they carry more weight than weekly and daily prices. Another thing you need to understand is that when a trend remains in force for a long period, it will carry a greater weight than those which come and go. If a trend has been active for a long period, it will give tougher resistance to rallies than those that have been around for a shorter period.
Analyzing the hot stocks selling high
When starting out, you need to do your research well and pay attention to the hot stocks which are growing. Ensure that you stay with the stocks until they reach their predicted heights before selling. Remember that you are allowed to buy and short-sell or do a covered call depending on the situation.
These are some of the considerations which you have to make when venturing into the stock market. It is important to ensure that you consult experts in trading before making any important decisions.
Embrace new technology
In the past, the best hope that you had at making a profit in real estate was getting a stockbroker and dealing with the process through phone calls and visits to them. The landscape has changed, and currently, technology is what oil was in the eighties and the nineties. When placing and buying your stocks, capitalize on these tech-based companies because if there is anything they have shown us, it is possible to create a multi-billion empire from a simple dorm room, and with no capital except intellectual property.
Always go for liquid stock
The stock market will always be unpredictable. As such, you want to stay with liquid and highly traded stock which is highly traded. This is the type of stock that will help you meet and exceed your trading goals within the shortest possible time. Avoid illiquid stocks because regardless of the amount of benefit they promise, they might not deliver. Finally, do not believe in everything that the stock says because everyone is at the stock exchange to make profits.
Those are the things you need to think about in connection with your stock and trading options. Most importantly, ditch the theory that you need to buy right at the bottom so you can sell right at the top. Regardless of the point where you enter a trade, as long as you study the trends well, you will not have a hard time making your profit. Start the process with baby steps, avoid diversifying or using leverage and instead, focus on two or three stocks and invest wisely.
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