When trading, there are a number of ways I use to help swing the odds of winning in my favour. Today I’d like to share these tips on how to time a trade with you.
Tip # 1: Base your trades on a fundamental reason
In brief this means you don’t want to climb into the market and start trading just for the sake of trading. Rather hang back until you see some specific fundamental reason, which you feel is a good motivation for your trade.
This could be something as simple as better than expected company results when trading a share, or as complex as the US Federal Reserve Banks monetary decisions when trading global indexes. The trick is, you don’t want to be left wondering why you got into a trade. You want to have a clear motivation for every trade.
Tip # 2: Use charts to give you the levels
There are a million books and publications out there all telling you exactly how to use technical analysis to make money. Which is why I’m not going to go into too much detail about how we determine the levels. Rather I’m going to focus on what most of these publications neglect to mention.
My view on technicals is they don’t have some magical future predictive power. The magic of technicals is their simplicity. They simply and clearly record in a graphical format, the past price and market behaviour of whatever is being looked at. You see, while most technical guides look at charts to try interpret information about the future price of the chart’s subject, few will alert you to the fact these charts can’t tell you much other than where its price has been, let alone predict where it will move.
By understanding this you can start to uncover the true strength of technical analysis. By looking at these graphs and charts you can start to identify what price levels are significant to the market. Now, by knowing what price levels are significant to the market, you can start to anticipate how the market will react at certain prices.
When using technicals to time your trade you’ll use them only to give you an idea of what price levels you should be looking to open or close your trade at. You should bear these price levels in mind and then be ready to react when the actual price reaches these levels.
Tip # 3: Go with the flow
When I say go with the flow I simply mean you should look to trade with the markets momentum. We’ve all heard the classic quote by Warren Buffett, “Be greedy when others are fearful and be fearful when others are greedy.” This is a strong and rewarding statement to those looking to invest, but for the geared trader a better quote to remember would be the words of Keynes, “The market can remain irrational longer than you can remain solvent.”
When trading geared products you can’t afford to sit and wait for the market to come around to your way of thinking. Doing this could result in unaffordable losses. I’m sure you’ve all heard people say, “The trend is your friend.” In trading this is more true than ever, so trade with the trend.
To make the most of your trades, be picky
Find a trade based on a good fundamental reason. Use technical analysis to find the levels where you should be looking to get in and out. Once the price has reached your technical levels then wait for the market to start moving in the direction you want. Once the move has started then jump in and hold on to that trend.
Use these 3 tips to start making some real profits.
One tip to add
Look to take profit. Far too often, traders look for too much. When the market starts to pull back, they are slow to close a position. Enjoy your profits and be happy to leave some for the other guys.
