Trade trend stock reversal is trend change trade opportunity. Trend is a movement for a stock . This movement may create a positive signal or a negative signal for traders. Moreover, stock trend trade movement can move a stock in upward or downward.
Stock trend also indicates bear market or bull market. Stock trend reversal indicates changing direction of a specific stock or the whole market. Generally, trend trading is suitable both for day traders and swing traders. Successful traders follow the trend to take buying and selling decision.
What are the types of trend in stock trading?
Simply, you can get at least three types of trend in stock trading. These are:
1. Uptrend or bull market trend
2. Down trend or bear market trend
3. Neutral trend or undecided trend
What is bear market or bull market for a stock?
Bear market for a stock doesn’t indicate that broad index is negative– whole market is in downtrend. Index may positive or negative. But, if a stock price is negative, we call this situation is bear market for a stock.
Bull market for a stock is the opposite of bear market for a stock. Both bear market and bull market are common scenery in stock market.
Let’s see an imaginary example of stock trend trade:
Bata shoes company’s share opening price is 40 dollars. Later, Bata shoes company’s share price reaches at 45 dollars. That indicates that Bata shoes company’s share price is in uptrend.
On the contrary, If Bata shoes company’s share price proceeds less than 40 dollars, we say that Bata shoes company’s share price is in downtrend.
How to stock trend trade in uptrend or bull market reversal?
Uptrend market is suitable both for holding stock or selling stock. However, traders prefer to sell in uptrend reversal. That means uptrend reversal is selling signal. Remember that a stock can temporally move in downtrend . Later, it can move uptrend again.
What is the right moment to sell in uptrend reversal ?
When a stock moves downtrend by changing its movement from uptrend and this trend is continually rally forward, you should sell this stock as soon as possible. Before putting selling order, you must need to confirm the downtrend rally.
10 selling strategies : how to take selling decision in uptrend reversal
1. At first you need to confirm the downtrend movement.
2. Don’t put sell order for all holding at a time.
3. Put selling order by segmenting your holding in different quantity with different price.
4. Hurry to put sell order. Otherwise, you may miss best selling opportunity.
5. While you can make sure that your holding reaches the peak point, you should sell before your holding changes opposite direction.
6. Control your emotion and greed .
7. Don’t regret after selling. In many cases, stock price may rise after your selling. Control your greed.
8. Wait for right time to put sell order.
9. Be patient when stock price is continually increasing.
10. Analyze technical and fundamental indicators to take selling decision.
Premature sell may kill your potential profit. But, you have no control over market. So, be patient if you take wrong selling decision. Can’t you make up your mind to take selling decision? You can follow selling styles to take selling decision.
How to stock trend trade in downtrend or bear market ?
Before taking any action, at first, you should understand downtrend market . Many traders use down trend to buy stock. Hence, down trend indicates buy signal. It is right time to buy shares. But the question is:
What is the right trend reversal to buy?
This answer depends on many factors. Experienced traders can easily find out final moment to buy. On the other hand, newbie traders cannot take right decision. As a newbie trader or little experienced trader, you should follow some factors to take buying decision.
10 buying strategies: How to take buying decision in trend reversal
1. Observe the market movement carefully.
2. Find out the reason behind downtrend market.
3. Try to understand price correction or price crash.
4. Analyze Relative Strength Index( RSI) and Money Flow Index (MFI). Moreover, Price to earnings ratio (P/E ratio is another important indicator. If these three indicators are high, wait for some days before putting buy order.
5. RSI below 30 is suitable for buying.
6. MFI between 30 to 40 is suitable for buying
7. P/E ratio should below 30 for fundamental stock to take buying decision.
8. Buy when downtrend stock starts to uptrend.
9. Put buying order at the beginning when the stock starts to move upward with large volume.
10. You may put buying order if a stock has continually lost price for some days and it begins to reverse trend .
If you can not win in buying, you may not win in selling. Perfect time and perfect stock are the main factors to win. But , you should not regret for wrong buying decision. Follow stop loss rule to cut short loss.
What is neutral stock trend trade?
Neutral trend creates when neither buyers nor sellers can control the market. Neutral trend is compared with undecided trend. Traders wait to take trade if a stock reach in neutral position.
What indicates neutral trend reversal?
Neutral trend has equal chance both for buyers and sellers. You need to take decision when neutral trend reverse . Put your decision in action when reverse go with you.
What is the stock trend trading strategy for neutral trend reversal?
Like many other traders, you should wait to see the next movement. If neutral trend proceeds downtrend, you just follow downtrend buying strategies that I described earlier section.
On the contrary, if the trend proceeds toward uptrend , you should follow uptrend reversal strategies.
Conclusion
Trade in reverse trend is widely followed strategy. Reverse trend creates benefit either buyers or sellers. Both buyers and sellers are not equally benefited from market trend. When a reverse trend goes your favor, you are temporarily winner. While a reverse trend goes against you, you are temporarily loser. So, take your decision carefully and never blame yourself. In case of any trade mistake, you should correct mistake early.
Founder of The Financial Ask
