Identify Buying Conditions
Identify Buying Conditions
Identify Buying Conditions
In my earlier articles, we have learnt indicators, chart patterns, money management and other pieces of successful trading. In this article, let us review those pieces and puzzle them together in order to find conditions we prefer for entering a trade.
Although we talk about conditions for buying or buy triggers in this article, you can apply them for short selling.
The very first thing to do when you are making a decision to enter a trade is to evaluate overall market. When you want to go buy, it is better to enter a trade while market is going up. Sometimes some stocks may go up while market is going down. Those stocks may hover in positive territory for a while, but overall negative market conditions will erode price surges.
When you pick a stock to buy, choose a leading stock in an industry sector that is a current market leader. For example, you see the banking industry currently serve as a market leader, so you target to analyze stocks in this sector to find the prominent stock and place it in your watch list.
Do not forget to check out the fundamental even you are technical traders. When you found a prominent stock, you have to check the company's fundamental health especially when you intend to hold a position for days or longer.
At this point if your target stock looked good, it is time to open the chart and analyze it technically. The price should have formed a base or is in uptrend. When the price breaks out, make sure it has strong volume.
Take a look at moving average (MA), is the price below or above the MA? If you want to go long, the price should be trade over MA and heading up (not too far from MA).
Also look at your indicator, if you want to go long but the relative strength index (RSI) is in overbought zone. It is not safe to buy. It is better to buy when RSI is in oversold zone and hooking to the upside.
In conclusion, here are the conditions to buy or buy trigger list. You should check against the list when you trade.
1) Evaluate market condition
2) Find a stock that is a leading company in a leading industry
3) Check the company's fundamental
4) Analyze the chart to find the entry point when all indicators output the same signal
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