So you are starting out in trading and you have developed your stock trading strategy . You have completed your initial emini futures and after some consideration you’ve deciding on trend trading for the style you prefer .
Trend trading is a strategy that is very attractive. Look at a stock chart retrospectively and the trending patterns jump out at you . You salivate about catching a beginning trend and then riding it out to its conclusion months later . Success is ahead of you and that money calls you!
Unforunately, in reality, trading isn’t that easy. You manage an entry – maybe you are late or maybe you have managed to enter near the beginning of a trend , but in any case you are aboard . Now that you are in the trade you move into a small profit as your predictions start to come true . Then you have a strong day and then the market stops dead when resistance is hit by the stock. You tell yourself that you can’t make the whole move in a day and there is more ahead and so you add to your position . The market opens the following day, goes nowhere for a while and then quickly heads south . Because you decided to add to the position you are fast back to breaking even and in fact by the time you have orders in place you have taken a loss . What is the deal? How could you tell ahead of time that the trend was not going to continue and that you should have taken the profit when the market started strong and then paused ?
Here are several tips for trading that will let you know when a trend is going to go on and when it’s going to stop . If you use them with your technical analysis training you will be well ahead of the game .
First and most importantly : to set your targets use higher time period charges ; look for logical areas of resistance and support to know when the market is going to stop or start.
If you do not know how to predict where future areas of support and resistance exist , or are uncertain how to coordinate time-frames in your trading , then you should look to a good emini futures course for some help . You’ll find Drummond Geometry to be a top option but a variety of valid schools of thought exist .
The second element is that you need is a tool that will help you judget robustness and trend strenght. Resistance or support will be broken through by a strong trend and a trend that is weak will stop or even go into congestion when it hits support or resistance or it could reverse course . If in the analysis tool kit you have the perfect tool you’ll be able to figure out which action is more probable ; you’ll have to wait and see without the right tools , and you have a high possibility of getting disappointed.
You need to use momentum tools to appropriately measure this and apply them to a timeframe that is smaller than the one you are trading … to make it plain if the daily chart is what you’re trading , with your trades try to pick the day’s high or low, then you would be looking at an hourly or half-hour chart to give you support in your trading decisions intraday .
We’ll talk about this more in part 2 of the emini futures series.