Trend Reversal: A Real-World Example
There are many types of trends in the stock market, all of which are used by traders in hopes of making money. Each of these trends follows a different pattern and when many traders follow the same ones, they start to become more frequent in the stock market. This in turn makes the trends a more reliable tool for predicting market movements.
In this blog post I am going to talk about my experience with trend reversals. This refers to a change in the direction of where the stock price 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.
Three days ago, I began my trading session by looking at a few different stock charts. Everyone has a preference for certain stocks that they keep a closer eye on, and these may change everyday depending on the trader. There are stocks that sometimes move more quickly and other stocks that move at a slower pace. I started off the day by looking at Nvidia, Amazon, QQQ, Apple, and a few other stocks in the tech industry.
After keeping an eye on all of these for a good amount of time, I realized that Nvidia was about to have what we call a trend reversal. I saw that it was a prime time to try and take advantage of this and I was lucky enough to be able to buy into the stock at the bottom point right where the green candlestick appeared. A candlestick is a term investors use to refer to a box that shows where the lowest, highest and end point of a stock in the time frame that it is set to, 1 minute, 2 minutes, 5 minutes, 1 hour, etc… Once I bought into this trade I had the mindset of holding it only for a short amount of time because I wasn't sure how high it would go and I didn't want to end up losing money. I was able to hold it for a few minutes and then I took it out. On this trade I made a rough profit of $75. I bought in at about $107-108 per share and then I sold at about $108-109 per share.
I didn’t make a very large profit off of this trade but It was still a good experience and it shows how the trend reversal trend works. I spent around 20 minutes looking at different charts and waiting for the right opportunity and then after buying into the trade I probably spent around another 10 minutes before I sold my shares of the stock. Overall I would consider it a good trading day and a good experience. Next time I see an opportunity like this I would like to try and hold onto the stock for a bit longer. If i had held onto this one for another 5 minutes my profit would probably have been at about $150 - 200 instead of $75. Sometimes it can be good to sell with a small profit because you don't want to lose it all by waiting too long.