Each investor’s dream is to buy cheap, sell expensive. We don’t say that is easy to buy the shares at the bottom and sell them at the top.

But to find points where trends really engaged in is not very difficult. It’s a strategy for active traders. We use two ways to leap to the trend’s beginning.

The first one is very simple and relatively safe. Initially we are looking for a flat price chart.

Why? Flat price is a sleeping price. And we hope a price will awakes and begins it’s way UP or DOWN.

Let’s look up at the example:

We see a flat from November to December at OSM price chart. And we see a fractal on November 30. It’s a resistance level. We placed a buy stop order one tick above this level. The market fulfilled on December 07. A price still moves UP. Picture is in my blog

Another one example is with AAI price chart. We see a flat and fractal on September 18. It’s a support level. We placed a buy short stop order one tick below this level. The market fulfilled on September 24. And we see a down-trend. Picture is in my blog

Another method is a bit complicated, and our psychology it complicates. Now we are looking for end of the strong trend. Here the problem begins. For example, we look for a strong down-trend and a point to place buy stop order.

When all around are falling, when some analysts and bloggers offers to sell stocks, we need nerves of steel to buy the shares. You must to distance from the external information. Absolutely! How to do?

Do not read anything about stocks, trends, waves etc. In particular, do not read traders bloggs on Internet. You must have a clear mind - tabula rasa.

Let’s look up at the example:

We see a down-trend in weekly FDX price chart. And here is an important feature: we see a bullish divergent bar at the end of trend. Look up, previous bars shows bearish market (Close price is lower than Open price). Our marked bar a signal. We placed buy stop order a tick above this bar maximum (38.85 USD). Now FDX price is 83.84 USD.

It must be a strong price’s chart angulation from the moving averages I called an Alligator, as my tutorial Bill Williams calls: Picture is in my blog

So, I consider you understand a main idea and will apply it to your own trading system.

Good luck!

    Posted in Investing from Investor on 10. Feb. 2010