Many of the traders are unable to trade well or make unnecessary mistakes during hunches. If I tell
you that I do not watch the stock price every second, you may not believe it.
Staring at the real time price(bid & ask) each second can cause severe heart attack and lousy trades.
Imagine that you come across a stock in the top 20 volume and price is moving up. You decide to open
the real time time and sale to see each transaction done. Every uptick in price makes you excite and lure
in to the trade which you have not done any analysis before hand. So you bought it in the morning session and watched the screen until market close. You felt like a champion that you had picked a steal from the market and money should be attracted to you soon.
Wait, second half of the session opened and Futures markets were down. Suddenly the local bourne
started to take a turn and STI index went from +30 pts to -50, now you were caught as the stock that
you bought earlier started to pull back to it's open price and now you lost 5cts a share. How could this happen?
How could the market being superb positive in the morning, now turning negative in the last trading session?
so what should I do now? should I sell away the stock or wait for another day and hopefully the price would go back the bought price so that I could even out and exit.
What a emotion roller coaster? from winning to losing within a day? Must be bad luck.
Above is a typical scenerio experiences by many including me as well.
Is there a better way to trade and not to worry about daily volatility and able to sleep well each night?
Yes for me, from the above diagram. "Buy zone" is the area where I will go long base on price and volume
action to confirm a trade. Once in the long trade, as long as price is not below the "sell zone", I would
keep the stock and let the stock to wiggle its way up the channel.
So when I will start to seriously look at the stock? when it is in the upper channel, "sell zone", where I may decide to take profit due to confirmed weakness base of price and volume analysis.Or price has traded
below the "buy zone" and I would cut loss and wait for the next opportunity to re-enter or go for other stock
that is exhibiting strength to move higher in the "buy zone".
To summarize, when a stock is in either "Buy zone" or "Sell zone", will I be interested to check the chart to identify potential strength or weakness.
When stock is in the "Do Nothing Zone", basically I will let the price to meander along the channel and do not bother by its activity each day until the price comes to the extreme ends (buy or sell zone)
