Strategies for trading like a pro

Trade like a pro: extreme trading

AN INTRODUCTION TO HOW TO TRADE LIKE A PRO

Trading can be daunting but with these few tactics I will show you how to trade like a pro. First of all,  trading does not have to be gambling. To trade like a pro means understanding the stock, how it is moving and forming a strategy that will maximize your profits. Price action is the movement of a security’s price. Price action is encompassed in technical and chart pattern analysis, which attempt to find order in the sometimes seemingly random movement of price. Swings (high and low), tests of resistance and consolidation are some examples of price action. Since to make a profit you want to buy low and sell high, or sell high and buy low, understanding how the stock price moves is critical if you want to trade like a pro. Extreme Trading will show you how to trade like a pro using “price action”.

Learn how price action can help you trade like a pro

Let us look at the factors that influence the stock price. First, the stock price is influenced by the value of a company. If the company is worth a lot of money then the stock will be worth more. So, do some research on a stock. Look at the company’s net worth, quarterly profits, and cash flow. Also has the company sold anything new recently? Is the company about to sell a new product? These questions will help you ascertain if the company is worth investing in.

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A key factor that investors look at is whether or not a company beats expectations. So, when you look up a stock, check when the next quarterly profits announcement will be. Every trading platform will give you this information, including a very key piece of data, the estimates of how much profit the investors think the company will make. It is not so much how much profit that influences stock but whether or not the company beats expectations. This is key! If a company beats expectations by a lot, the stock will most likely shoot up but if the company fails expectations then the stock will likely plummet.

Another key factor in price action is looking at trends. Look at a chart that displays the price changes over time at scales of 1 day, 3 days, 1 week , 2 months or even 1 year. To trade like a pro, you will need to look for trends. Is the stock consistently going up? Is it going up over a long period of time or only short term? If the stock is going up over a long period of time then you will want to buy the stock and hold it for a long period of time. Do not be afraid if the stock goes down because you are in it for the long haul.

Another key price action that you need to look for if you want to trade like a pro is something called resistance. This is where a stock seems to resist going below a specific price. When you look at the graph, you will see the price move up or down but always seem to go back up when it gets close to dropping below a specific value. This value is the resistance. Investors do not want the price to drop below that value so they push it up. Resistance is key because it will give you a limit that you know the price will not drop below. If the price is inching toward the resistance, it is probably a good time to buy since the price will go up. Resistance can also be a maximum value where the stock price does not go above a certain value. This is because investors do not want to pay more for the price so they push the stock down. This can be because investors feel that the stock would be overvalued above the resistance line. This can also work to your advantage because if you own stock and it is rising to the resistance then it might be time to sell since the stock is about to drop back down.

I hope these tactics help you trade like a pro!

To your trading success,

James H.

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