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agiletrader2000

Recognizing Trends

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I'm new to options but I've learned a lot by now from the Options University dvds.The only thing I still do not understand is the trend of stocks. For every trend there is a strategy. But when is a certain trend a certain trend???

 

What does a slightly upwards trend look like? How many days will this pattern last? When do I need to get in? What are signals to look at?

( I need to know the same things for : agressive up or down, stagnation, 'normal'down/up, slightly down/up)

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So you only need to know 1) when trends will show up and 2) the strength of the trend?

 

Simple enough.

 

:roll eyes:

 

In those DVDs you bought, did your educators not share these secrets with you? What exactly did you pay them for? Maybe it's time to contact the people you are paying to educate you first.

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Yes I see.

Is that correct for trends? Does this definition is still actual and used by traders:

 

... you can recognize a trend if you try to find a peak series. If you see ascending minimum peaks, it is most probably up-trend. Conversely, descending maximum peaks give us a hint about down-trend.

... When a trend ends? Just using the same definition. When ascending minimums are no longer ascending, meaning a new minimum peak is lower than prevoius, one can say that "Trend is no loger your friend". It's important what to do in this situation?

... Usually trend reversals do double tops/bottoms or "head & shoulders" pattern. So it is often possible to exit on return to resistance line (double bottom case) or "neck" line ("head & shoulders" case).

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... you can recognize a trend if you try to find a peak series. If you see ascending minimum peaks, it is most probably up-trend. Conversely, descending maximum peaks give us a hint about down-trend.

... When a trend ends? Just using the same definition. When ascending minimums are no longer ascending, meaning a new minimum peak is lower than previous, one can say that "Trend is no longer your friend". It's important what to do in this situation?

... Usually trend reversals do double tops/bottoms or "head & shoulders" pattern. So it is often possible to exit on return to resistance line (double bottom case) or "neck" line ("head & shoulders" case).

 

So what you are asking is how does is become determinative of trend and trend stregth so as to know when do ascending minimums reach their maximum extensionality so as to allow the trader proximally to identify said eventuality, to wit that the descedning maximums have not been confused with the minimalizing ascensions while true but without regard to ...

 

 

 

Friend, if you are new to options (sounds as though you are new to trading, may I suggest first of all that you learn to trade options in a purely direction basis and only from the long side, i.e. be long of calls if you are betting on higher prices and be long of puts if your are betting on lower prices.

 

If you are new to trading, may I also suggest that you open an account with a good discount stock broker, deposit no more than 5K, and trade shares, not options. Trade 10 lots, not round lots. Take it slow and easy. If you cannot trade 10 lots profitably, you will not be able to trade options profitably. Your capital per trade will still be small, as it would be if you had bought an option, but whereas your option will go to zero if it expire out of the money, most likely your 10 shares, barring bankruptcy, will still retain most of their value.

 

For example, suppose you thought that Caterpillar (CAT) shares were going to be higher in May than they are right now. Right now you can buy 10 shares of CAT for 537.90 + commish, or 53.79/share. Or, you could buy the May 52.50 call for $475 + commish. If you are correct, and CAT is trading at, say $70 anytime between now and May, your profit will be $1275 on the option, and only $162.10 on a 10 lot purchase. That is why folks want to trade options,and that is why you were willing to buy whatever options course you purchased, right?

 

However, suppose you are wrong, and rather than rising to $70/share, CAT shares instead lose 50% of their value, and becasue you kept hoping that it would come back, you held onto your option all the way to May expiration. Now, you have a loss of $475 on the option - you lost the entire amount you paid as premium for that option. However, you are able to liquidate your long 10 shares of stock for $268.95. You see, there is typically less risk in owning shares than in trading options, though that is never the way it is presented by the sellers of options course. They have you focused on potential profits. You need instead to focus upon potential losses. Learn to lose small first. Yes, that means you will also win smaller than you are currently dreaming, but let's face it, unless you first learn how to lose, you will never, ever, ever win consistently anyway.

 

As far as your trend questions, I would suggest you read the newest editions of William O'Neil's How to Make Money in Stocks, find an old edition (pre-ninth) of Edwards and Magee's Technical Analysis of Stock Trends, and the technical analysis chapters of Victor Sperandeo's Trader Vic 1 and 2. I would also advise you to read Reminiscences of a Stock Operator and Nicolas Darvas's How I Made 2,000,000 in the Stock Market.

 

You might also find some useful information here at TL - you might want to try this post:

 

http://www.traderslaboratory.com/forums/208/reading-charts-real-time-6151-84.html#post79635

 

I wish you well.

 

Best Wishes,

 

Thales

 

Seriously,

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