Always trade in the direction of the Momentum !
Updated
Who goes long for a share when its bearish? Do you sell your shares if trend is bullish? how can one understand the status of a stock?
One of pillars of successful trading is to trade in the direction of the momentum. of course it is not guarantee your success in all trades but it is definitely a must thing to consider and is necessary for a good trade.
There are some indicators which show the momentum of the market among which " STOCHASTIC" and " STOCHASTIC RSI" can be mentioned.
Simply the momentum is bullish if fast line ( Blue in stochastic indicator) crosses slow line( Red in stochastic indicator) upward and Momentum is bearish if fast line crosses slow line downward.
It is OK to go long if Momentum is Bullish and is OK to go short if it is is bearish. 2 bullish reversals are shown in the chart which show a good point to buy shares . One Bearish reversal is also shown which indicates a good time to go short.
Bullish and bearish reversals in oversold and overbought zones are more powerful. when both fast and slow lines are in oversold zone ( below line 20) it tells us that down side should be very limited. if both lines are in overbought zone ( above line 80) we can expect a near bearish reversal.
Combination of this concept with Elliott wave patterns and Fibonacci levels can give you a powerful tool which is beyond the scope of this post . A simple and elementary example is shown in the TSLA chart which a bearish reversal coincides with 0.618 Fibo retracement and descending trend line.
My strong recommendation is just simply put away those ideas which encourage you to go long when momentum is bearish or (bullish but in overbought zone) and vice versa.
Good Luck in your trades
One of pillars of successful trading is to trade in the direction of the momentum. of course it is not guarantee your success in all trades but it is definitely a must thing to consider and is necessary for a good trade.
There are some indicators which show the momentum of the market among which " STOCHASTIC" and " STOCHASTIC RSI" can be mentioned.
Simply the momentum is bullish if fast line ( Blue in stochastic indicator) crosses slow line( Red in stochastic indicator) upward and Momentum is bearish if fast line crosses slow line downward.
It is OK to go long if Momentum is Bullish and is OK to go short if it is is bearish. 2 bullish reversals are shown in the chart which show a good point to buy shares . One Bearish reversal is also shown which indicates a good time to go short.
Bullish and bearish reversals in oversold and overbought zones are more powerful. when both fast and slow lines are in oversold zone ( below line 20) it tells us that down side should be very limited. if both lines are in overbought zone ( above line 80) we can expect a near bearish reversal.
Combination of this concept with Elliott wave patterns and Fibonacci levels can give you a powerful tool which is beyond the scope of this post . A simple and elementary example is shown in the TSLA chart which a bearish reversal coincides with 0.618 Fibo retracement and descending trend line.
My strong recommendation is just simply put away those ideas which encourage you to go long when momentum is bearish or (bullish but in overbought zone) and vice versa.
Good Luck in your trades
Note
The power of trading in the direction of the momentum proved itself once again. This is very simple yet powerful tool. Keep it in mind. It will help you in your next trades.Note
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