Monday, March 9, 2009

Trading from the Base

When, finally, the foundation will be formed long Bear Market? Traders often ask myself this question.

If good news can take months or years to answer this question. But if this is not the reason, then we will know about it fairly quickly because the market would violate the minimum level and resume its decline.

In any case, let's see what is expected in the ground. " Perhaps it tells us when to expect a change of trend.

Foundations are formed as a result of market physics. Ascending and descending trends show the natural movement of the waves as they push the price in advance, and they retreat to test maxima or minima. This action-resistance is becoming a very important turning points in the market. This implies that the model will be turning at some point in every trend. During a rising trend, the lower the maximum will eventually follow a higher peak and pointed to the new peak. During the downward trend, lower minimums, finally, stop when the price action will mark a higher minimum. It shows the birth of reason.

There are many varieties of reasons, including the rounded bases, triple base and V-base. The problem is that you never know what type of foundation is developing until it finally formed. The most usual is a kind of dual authority, which creates another market for a higher minimum, before the rally up.

The potential profit reaches its maximum at the beginning of a new bottom-up trend. Therefore, were right at the base, you can get significant benefits. But the choice of bases can be dangerous. Check again, weighing all the evidence available at your disposal before you jump in a falling market and apply a protective, risk management, to ensure a safe exit, if you were wrong. For example, take the loss immediately, if the previous minimum overcome.

The grounds arise during the descending trend. If there is an additional danger, because the traders often believe in the foundation before it is confirmed the price action. Early execution can cost you a lot of money in this volatile situation. Less experienced traders should stay out of the market and allow others to yield to the temptation to base. Will have a lot of good deals, if and when the market move higher.

Facing spectacular offer small profit if the price can not rise from the pit into which she fell for the first time. Place a stop order under the previous minimum, and consider an earlier exit, when the first powerful spurt exhaust all the momentum. Price may gather momentum bases near disturbed minima, as it searches for new support.

Successful trading requires a good foundation from the extracts. Nekhoroshev feeling arises, these turning points, even when the technical indicators are ideally arranged in a line. Why are we so attracted by these deals? Being right at the base, we get a very high ratio of return to risk.

The grounds make a very strong market momentum. There are fresh buyers willing to speculate and sellers who do not understand that they were lured into a trap. These two forces combined to produce an enormous purchasing power, which can cause explosive movement. Only one of the reason, traders should take into account the dignity of choice grounds.

Market decline into the market on grounds that are characterized by failed rallies and recovery to former levels. Bear markets end when the "strong hand" finally knock past losers.

Therefore, the time will come when the price can climb to the top of the resistance and continue to go further. Relative strength improved in the main turning point, and graphics will shape bychi bar with the price closing near their highs. And then the market begins a steady march through the wall, built by previous failures.

Markets must overcome force of gravity, to enter into the new ascending trend. Players on the undervalued asset base grounds, but they can not provide the critical mass necessary to ensure strong ascent. Fortunately, the crowd, trading on momentum, kept just in time to carry out this important work. As soon as the markets are rising above resistance, greed is evident, and it is high time the players that play on the growth, jumps on board.

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