Saturday, April 16, 2011
Trend for 16th of April 2011
Markets are closed today and nothing happens. Therefore, I want to talk a little bit on how you can add to a position in an uptrend. This would be coming back to what I told you about silver long term trend a week ago. As you know silver is in an uptrend and this week saw new heights in this commodity. So, when you know that some security is in an uptrend you would be willing to add to your long position. Smart traders usually form a line of positions both in an uptrend and a downtrend. Let me tell you a few things about adding to your position in an uptrend.
So, firstly you need to wait for retracements or what traders like calling ‘dips’. You do not want to pay the most expensive price for a security (unless you are a breakout trader and you buy when price makes new highs). Ok, you wait for prices to collapse. When you see that happening, you want to see the price to find support somewhere and jump from that level. You want to see a rally up. Then, you wait for the price to start going back down to test the support if it holds so to speak.
If the price reaches most recent support (it may go a little bit lower or not reach the price by a few ticks) you want to see a jump off the level again and a second point of support formed. Then the price will start going back to most recent resistance. Now, you have to watch carefully what happens there. Ideally you could see a price reach the resistance and retrace back a little and then break the resistance. Of course, ideal situations do not happen too often in markets. So, you might just place a buy stop order above the most recent high and when the market reaches the price your order is automatically opened.
When this happens you continue your stride up with the trend. And you should also remember to keep moving your stop up, just in case the trend reverses suddenly and you lose a big part or all of your profits. I will talk about these things in my later posts. There are also other ways of adding to your position in an uptrend and those will also be covered later. To better understand what I mean by these tips I placed a chart for you to look at. See you tomorrow.
Read my previous post:
How you could have traded news in eur/usd pair on Friday
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.