Did most of us learn this lesson at stock market trading school? We have a tendency to have visions that many traders didn’t learn this lesson. Some traders have learned this tutorial, nevertheless, still will not put into service this tutorial in their daily, weekly and monthly stock investing.
Some day traders still go against the dominant stock market trend. The broader market which in this instance we will refer to as the SPY and the QQQQ’s, are what construct the market. Stocks traded inside either market must always compliment the trend of the broader market.
What do we mean? stocks ought to complement the direction of the market.
In the example, that a trader decides to put a swing trade, using the target to hold the open trade for 2-8days, the trader must have an exact image of what the broader market is doing. If the experienced trader places a trade of ABCD stock on Tuesday and the QQQQ’s are at a significant support zone and consolidating to head higher, the stock market investor understands, with 70-85% correctness that their swing trade is guaranteed to be successful. The broader market will support ABCD stock higher.
However, if a day trader places a long trade and the broader market is poises for a retracement and the trader is not responsive to this, ABCD stock will either hang around at the entry position and do nil, or the stock will follow the direction of the market and head south with the market. 70% of the time the stock will follow the trend of the market, which in our example, the broader market would be heading south, so, the stock would follow south. Thus, in the case of the swing experienced trader, the trade will either result in a lose or an obvious waste of time.
Make certain that all trades that you’re taking are in a similar trend as the broader market. If the broader market is primed to reposition higher, find advanced probability stock trades which can be preparing to head higher. Take trades in the direction of the crowd, the trend is your friend.
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