The art of trading. When stock prices start to maneuver within a specific range, falling to established lows then rebounding up to established highs and fall back again, the stocks are said to be during a consolidation or congested phase.
Most of the time, typical consolidation patterns may be seen, with the foremost common one being the rectangle pattern or sometimes called a price “corridor” or channel.
When prices start to drop, traders get nervous and weak holders will sell their stocks in order that they’ll fall to a term which other traders will consider an honest price to shop for. From that level, stock prices will then rebound, often with volume as support comes into the stock.
As the price of the stock improves and increases, it’ll reach a peak where traders who have purchased the stock at lower prices will sell. At the identical time, weak holders who have purchased the stock at higher prices might need to bail out as their losses are narrowed with the improved prices. At that time in time, resistance is encountered, and also the stock price then tops over to make a peak.
When you connect the support prices and also the peak prices where the value tops over, you may find the pattern of a channel or a rectangle.
During consolidation phases, prices trade within a variety formed by the underside of the channel or rectangle and also the top of the rectangle or channel.
Technically, the employment of oscillators is suitable for trading within congestion phases. The keys to spot the underside of the channel and to shop for closer to the underside of the channel and to sell as prices reaches the highest of the channel or rectangle.
A common mistake newer traders commit is to still use their trend following trading system during a congested phase and encounter plenty of whipsaws as prices oscillate between a tiny low range.
When you transit from a bullish market and moves into a bearish market, be contented with smaller gains which come from trading the congested and consolidation phases. Fall back upon oscillators to trace your stock prices and trade them in relevancy their location within the worth rectangle pattern that you simply can easily identify in your stock chart,
The advantages of day trading
Historically, stock trading has been the domain of professional traders. Trading has been in essence a “private club” with restricted access. Day trading has changed that. For the primary time, amateur traders have the tools (real time quotes and order execution) to compete with the professionals.
Speed advantage of day trading
The key advantage of day trading is its speed. Now the technology is advanced enough to afford day traders the flexibility to receive and observe real-time price quotes tick by tick and to send electronically an execution order on to the NASDAQ market maker. Electronic order execution is fast. Confirmations are received in seconds. Exiting trades is as easy and fast as entering the trade positions.
Control advantage of day trading
The other key advantage of day trading is that the control of trading. Day traders are always on top of things of their own trading. they’re their own brokers. They examine the financial data, ascertain the trends, and make their own decisions to shop for or sell. Day traders don’t need to worry about the worth slippage. They monitor market prices tick by tick. During trading, at any point of your time the trader always knows the stock’s best BID or ASK price.
Going home “flat”
At the top of the trading day, day traders close all of their trade positions and head home “flat”. Day traders don’t have to worry a few “long” or “short” position – because they are doing not have overnight positions. with non open positions, day traders don’t carry any overnight risk exposure.