Make Money In Stocks How The Day Traders Do It

Make Money In Stocks How The Day Traders Do It



Make Money in​ Stocks - How the​ Day Traders Do It
No doubt you've heard of​ 'day traders' and how they sit at​ home making big money without having any boss or​ customers or​ have any need to​ interact with anybody .​
So how do they do it? Well they use a​ number of​ techniques but in​ this article we're going to​ explore one (and probably the​ most used),​ 'Technical Analysis'.
Before we start clarification must be made that the​ author is​ not a​ financial consultant and this article is​ not intended to​ direct or​ advise you​ in​ your investment strategies .​
This article is​ merely to​ describe some of​ the​ author's observations whether real or​ imagined.
People,​ especially concerning publicly available information,​ tend to​ respond at​ least to​ some degree as​ they percieve others to​ respond .​
For example: if​ people continue to​ buy stock until it​ reaches a​ certain price and then stop (for whatever reason) once,​ when the​ stock turns around (after the​ dive) and goes back up,​ people will be more wary of​ keeping the​ stock after it​ goes over that price again .​
This is​ known as​ a​ 'resistance' line .​
Of course resistance lines are broken all the​ time but patterns do seem to​ exist within stock pricing histories.
The job of​ a​ technical analyist is​ to​ be able to​ spot situations where the​ odds are in​ there favor that a​ particular stock will go up or​ down .​
Technical analysts watch for certain patterns and buy and sell stock based on​ predictions made as​ a​ result of​ spotting those patterns .​
Of course no one can acurately predict what stock prices will do 100% of​ the​ time but day traders generally try to​ keep the​ odds in​ their favor and that's how they make money.
If you​ have reason (even just a​ little) to​ believe that a​ particular stock is​ going to​ go up you​ might buy some .​
You recognize that it​ might go down a​ bit first so you​ determine how far to​ let it​ drop before you​ sell .​
If within that margin it​ turns and goes up you​ can ride it​ all the​ way up to​ the​ point where *you expect it* to​ start to​ fall (a resistance line) .​
If you​ keep doing this (lose a​ little or​ gain a​ lot) over and over and you​ make money just 50% of​ the​ time,​ you'll profit from your overall investments .​
The trick is​ to​ be consistent .​
Get out every time it​ drops too far and never ride it​ above where you​ expect it​ to​ turn or​ you​ might get caught in​ an​ inverted spike and lose a​ whole lot real fast.
To study patterns you​ need to​ get a​ stock analyis software package or​ go to​ a​ Website where you​ can study stock trends .​
We like to​ go to​ www.bigcharts.com .​
OK,​ so what are the​ patterns that Technical Analysists look for?
To 'short' a​ stock is​ to​ 'sell' it​ at​ a​ specific price (not having bought it) and then 'buy it​ back' after it​ drops below that price .​
Brokers let you​ do this and you​ don't actually end up with the​ stock in​ the​ end .​
Basically you​ 'sort of' buy stock expecting it​ to​ go down instead of​ up.
Here are a​ few of​ the​ most common ones:
Head & Shoulders: the​ stock goes up and comes back down .​
It goes back up but farther (maybe 1/3 to​ 1/2 higher) and drops back to​ the​ same line .​
It goes back up again but the​ the same point as​ the​ first time and drops again .​
This pattern looks vaguely like a​ head and shoulders .​
When the​ price drops below the​ 'neckline' it​ is​ expected to​ continue to​ drop .​
The investor would short the​ stock in​ this case .​
This pattern is​ also seen frequently in​ an​ inverted pattern .​
In that case a​ long (buy the​ stock) would be indicated.
Cup & Handle: the​ stock goes down and then back up to​ form a​ pattern that vaguely looks like a​ cup .​
Then it​ goes back down just a​ little and back up to​ form what vaguely looks like the​ cup's handle (around 50% of​ the​ cup bottom) .​
Now there are 2 points on​ a​ line where the​ stock reached and then went back down and it's right back at​ the​ top of​ the​ cup .​
The time of​ execution is​ when the​ stock reaches that point for the​ 3rd time .​
The stock is​ expected to​ shoot up to​ the​ next higher resistance point (above the​ cup's top).
Triangle or​ Wedge: the​ stock goes up and back down then back up then back down where the​ top and/or bottom price lessen consistently so that the​ distance between the​ top and bottom is​ less each time .​
If you​ drew a​ line by connecting the​ points of​ the​ top price and then another line connecting the​ points of​ the​ bottom price you​ would draw a​ triangle .​
When the​ price 'breaks out' of​ the​ triangle it​ is​ expected to​ continue in​ the​ direction that it's going .​
Very similar patterns to​ this are called the​ Flag and the​ Pennant.
Double Top: the​ stock goes up then back down to​ a​ point and then back up .​
When it​ hits the​ price that it​ turned at​ the​ last time it​ turns again .​
The pattern looks like an​ M but all the​ lines are diagonal .​
If it​ breaks below the​ point at​ which it​ bottomed out (in the​ middle of​ the​ M) it​ is​ expected to​ continue down .​
a​ short is​ indicated .​
An inverted version of​ this pattern (a W) would indicate a​ long (buy).
Many more patterns are recognized and the​ art of​ reading them is​ complex .​
This article is​ not intended to​ teach how to​ buy and sell stocks using Technical Analysis .​
It is​ intended only to​ introduce the​ subject and perhaps inspire further learning.
You can gain a​ great deal of​ information about studying stock patterns using Technical Analysis .​
Do a​ search in​ the​ search engines on​ the​ Internet for 'stocks Technical Analysis patterns' and you​ will find many Websites that explain it.
This author recommends two books on​ the​ subject: 'Technical Analysis Explained' by Martin J .​
Pring and 'The Master Swing Trader' by Alan S .​
Farley .​
You can also visit Alan Farley's Website and get free stock picks by him and his associates at: www.hardrightedge.com.




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