Thursday, March 12, 2009

Cycles of momentum

Beginners quickly fall under the period of fast moving markets. However, sales momentum in a much more difficult than most of the participants felt. When the emotional crowd creates a sharp price movement, greed overshadows the understanding of risk. Inexperienced trader reacts foolishly and has a position just behind the large volume, where the chances of spread rapidly increasing.

Prices rarely move in a straight line. Because the bursts are destabilizing the market, there is the opposite force to restore the price back to its stable state. The inevitable backward reaction follows each forward impulse. Swallowed up the money crowd, feeding impulsive motion, the markets are looking for balance before continuing the next price shock.
Inexperienced traders do not take into account the cycle at the entrance to the impulse transactions. They blindly carry out the position, following the usual and dangerous strategy: market entry, with the acceleration of aftershocks. The lack of moving stop orders and the effective management of risk, both for good or for bad attitudes lead to a loss of money, because the sharp counter-trend movements destroy profits. As the inevitable reaction to not bring profit, the losses are increasing, as blind fear chooses the exact turning point to finally get out of the market.

Regarded as acting, so the reaction in the development of effective impulse transactions. This requires integrated planning and individual performance. One successful strategy requires a trade against a natural inclination: the entrance to the counter-trend reactions and output during acceleration shocks. This adjusts the position of the main trend, but the emotions of the current crowd. Sign in to accelerating the momentum can also work when placed close to the stop-order and the trader goes in further acceleration. This eliminates the risk associated with the inevitable setback.

Choosing an incorrect entry in the action-counteraction to lead to unfortunate results. Every trader has experienced the pain when the log in with a low risk and moving to a favorable trend, then he loses everything in the subsequent reaction. Try to avoid a similar experience, using clearly defined tactics to minimize emotional trading on impulse. Add this practice to a multi-trend technical analysis and mutual inspection, to determine the best point of oscillation and determine the location of natural emergency exits.

Skiing in the wake of

Markets «inhale and exhale», as the evolving dynamic trends. The reaction follows the impulse, because the momentum is looking for stability in the preparation of the new price change. Experienced traders read this continuous cycle through the movement of waves on the charts.

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