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A key component in a stock trading system is charts. Charts monitor stock movement over time and the trading style will determine the timeframe of investigation. Day traders are interested in changing patterns over hourly increments whilst longer term investors monitor stock changes over weeks, months and even historically over years.
One thing to look for in a stock chart is whether or not the stock is exhibiting price variations within a trading range. In this case the highs and lows of the stock's price are bound by a consistent high and a consistent low price. Graphing the highs and lows will show a trading band which shows the sideways movement of stock price over time. The value of a stock exhibiting a trading range is is in making smaller profits based on the smaller variations in price whilst keeping an eye on the stock for potential break out behaviour where the stock my undergo either a steady price rise or decline. Some traders will monitor a stock within a trading range to be ready for a potential breakout.
Trend trading is buying and selling stocks based on the indicated upward or downward trend of the stock price. A trend is indicated when three peaks or troughs can be joined by a straight line. Both upward and downward trends can be advantagous depending on the predicted movement in price and whether you are shorting stocks on a downward trend or buying low and selling high.
Used wisely, custom stock charting software can be a tremendous boon in analyzing very large amounts of data and presenting it in a way that can make it easier to see what is going on with a particular stock or to make comparisons between stocks. Different trading indicators can be overlayed on the same chart to provide different points for comparison.
In the end, a trader will develop their own personal style irregardless of whether the latest technology for data analyis is used or the preference is for something simple like a spreadsheet. No system is 100% perfect and the aim is not to win all the time but for the wins to exceed the losses by a fair margin and in an acceptable timeframe.
Do be aware of advances in trading systems and continue to tweak your system based on both your results and in the light of new insights into trading systems. Don't be a slave to technical tools but rather develop your system as a blend of personal style and "mechanical" tools.
Category: InvestingStock Market Profits Using a Stock Trading System was written by:Author:Mark CrispAdded: Thu, 12 Apr 2007 08:23:05 -0400 This Article Has Been Read 201 times View all Mark Crisp's articlesAbout the Author: Mark Crisp is an experienced stock trading and the creator of the Momentum Stock Trading System which focuses on big moves for big profits. Click here http://www.crispstocks.com to get your complimentary copy of The Seven Habits of a Successful Trader. |
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