Elements of a trading plan. If you trade without a plan, based on in-depth analysis and testing, you will seriously weaken its position. Treiding, as well as politics or war, including the tactics and strategy – a combination of general plan with specific techniques to accomplish this plan. Woe to the army, which has no policies or practices of warfare. Powerful forces have repeatedly defeated by the weaker opponents because of lack of tactical skills. And just a great trading idea is useless without a viable plan for its implementation.
Stock trading is associated with greater emotional weight – because of adrenaline, which is often accompanied by only one idea that can make or lose big money. Many newcomers rushing into deals without a clear idea about how to obtain the potential profits to which they think are within reach. To avoid this trap, you should always approach the markets with a detailed plan – regardless of your trading style, time period, the market or method. Slogan, which is worth remembering – plan your trade and Trade in your plan. The plan should actually suggest specific steps that you can perform. Common words or vague rules lead to the "intuitive" trade, which inevitably ends with unnecessary losses.
Losing trades are inevitable, but to do so they appear as seldom as possible. Prior to the auction before placing the transaction you must be sure that your approach has positive probability of profit. To form a quite simply, that's just not easy to do.
Shopping in the rising and Sales in lowering trend in the majority of traders do not coincide with the rhythm of the market. Please note that we do not consider cases in which trade is created at the time of birth trend. Now we are talking about how they should behave within the trend. And for this situation are the best ways to enter the market based on the use of trend lines with the support or resistance, defined by the last completed movements. So, here are two the best point of allowing to enter the trade with a high probability of success at a relatively small proportion of risk in the market trend. In each of them assumed the use of limit orders, and only occasionally – the market if It has a good reason. Point 1.
Buying from the line of the uptrend in the third contact. An uptrend is defined as prices rise. We have an opportunity to draw a line with a slope up. She held on two consecutive rising grounds price bars with respect to the absolute bottom of at least two previous and two subsequent bars. The best time to enter the market occurs when third touch price trend line. At this point, of course, need to buy – and buy only (Fig. 1). Using this technique, you should inquire in advance of price levels, which may be different – depending on the addition, at what point will touch the price with the trend.
The Dow Theory was developed in the early twentieth century to assess the overall state of the economy, but in the future speculators took her into service for the market analysis. Dow Theory is composed of 6 ideas. Index takes into account everything. All information which is available to market participants immediately accounted for in share price. The market constantly, there are three trends. The first trend – global. It lasts for years. The second trend – the movement against the main trend, ie it correction, which may last several months.
The third kind of trend – a slight movement of the second trend. In this case, their direction may coincide with major market movement, and whether to be against him. Home trend has three phases. The first phase – a period of decline in the economy. The bulk of investors’ negative attitude to investment. Recommendations of brokers and experts – to sell. Stocks and other assets are very cheap.
During this period, most informed and far-sighted players are anxious to buy assets. The second phase is characterized by improved overall economy. Come into play, technical analysts, who noted a clear reversal trend. At the third phase has a peak in corporate profits, is the rapid growth of the economy. The general public begins to aggressively buy all types of assets. However, investors who bought in the first phase are gradually close their positions. It is worth adding that the market tended to remain investors buying on the first and second phases. the rest of the audience does not make big capital ilivovse loses a significant portion of their investment. Indices must confirm each other. This means that if the indices move in one direction, but in this case the market is a clear trend. Trend remains unchanged, there is no clear signal changing trends. Until all stock market indices do not show apparent reverse trend is unchanged. Volume must confirm the trend. Volumes should grow in the direction of the prevailing trend. Recall the third idea of the theory of the three phases of the trend. The volume will increase when the game will include all new members. Despite more than a century, Dow Theory does not lose its relevance in the present. As an example, look at the timetable for any action a large company and before you invest your money is to answer the question: what phase is now on the market?