Trends
To make money on trading, you need to buy and sell stocks at the right time. This is where trends come in. Trends help us decide whether it’s a good time to buy or sell a stock.
The only way for a trend to work is if a vast majority of traders know and follow a certain trend. For example, let’s say that 90% of traders know about a trend. The percentage of them using it is pretty high, and for that reason if we have thousands of people all buying and selling at the same time in order to follow the trend, then the trend will stay true and work the majority of the time. Thus, trends only work if many traders follow them. Therefore, knowing a lot of trends doesn’t always help, but if you know about the most common trends then those can sometimes help you make good trading decisions.
The trend I’m going to focus on is the trend reversal. This trend can help you time your buying so that you can take advantage of the opportunities, and is tracked using candlesticks.
To understand how candlesticks work, let’s imagine that a stock drops in price. We represent this with a red candlestick. This is an image showing how far the stock has dropped, where the price starts and finishes, and the highest and lowest price that was reached during that time frame. The time frame could be 1 minute, 2 minutes, or whatever time frame that you choose to look at.
A trend reversal is a change in the direction of where the price of the stock is going. It either shows the trend going up and then dropping down, or it shows the trend going down and shooting back up. When you see this type of reversal, it may be a good time to buy the stock because there is a good percentage chance that it will go back up or down. Here’s an example of a trend reversal, we have a positive and negative trend reversal.
Trend reversals don’t always work, and they are hard to time correctly. However, as you can see in this live chart, it does happen sometimes. If you notice it while it is happening, then you might be able to take advantage of it in order to make some money.
As you can see in this live chart, this is a prime chance to make money. I placed this trade on a stock called NVDA. This trend reversal is going down. If you time it right and buy it at the highest point, and then sell it at the lowest possible point, you have a chance of making a profit. Unfortunately, I wasn’t able to time my entry and sell points correctly, and due to this I ended up splitting about even. Hopefully next time I will be able to time it right in order to make a profit, but it takes some practice and patience in order to do it correctly.
