Market Success Using The Top Down Trading Strategy
Satisfactory trading mixes timing, cashflow control and emotional control. Another key element is employing a proved system to tell you precisely when to build a position in the market. Many decades back, Jesse Livermore, who is potentially the best stock exchange trader ever, developed a technique or system called "Top Down Trading". The concept behind this strategy is to have as many main factors in your favour as practicable before taking a position in the exchange.
The 1st factor Livermore would build is the current market direction. Is the general market in an uptrend or downtrend? A new position in the exchange would only be taken in an uptrend. Roughly seventy five percent of all stocks follow the prevailing general market direction. This makes it extremely sensible to only get a stock with the general market in an uptrend.
The second factor is to check the particular industry group of the stock you are considering. Let's imagine your stock belongs in the "Mining-Gems" industry group. Because stocks have a tendency to move in groups, its crucial to know if this precise industry group has been getting stronger or weaker over the past few weeks and months. You would require the industry group of your stock to getting stronger. This industry group research can account for 30-40% of a stock's final price movement.
The following factor to think about is whats called tandem trading. Compare your stock to a sister stock in the same industry group. If you're considering stock in Wells Fargo, check out B.O. An also. Place the 2 stocks of the same group next to one another and check their charts. They should look fundamentally the same. This is a confirmation your stock is acting the way that it should be.
The final step is the check out all 4 factors at the exact same time. Glance at the general market direction, the industry group, the tandem comparison, and the particular stock you are considering. This is your last research to be sure the chances are strongly in your favour before you take a position in the stock market.
The "Top Down Trading" methodology is just as valid and successful today as it was many decades back.
Article Source: FxTradingStock.com
About the Author
Looking to find the best deal on best dividend stocks, then visit my website to find the best advice on barclays etf for you.
by: Robert Von Hobbes
Total views: 25
Word Count: 378
Date: Fri, 11 Feb 2011
Publish/Share this article
To use this article on your site click here to get the HTML code
Rating: Not yet rated
Login to vote
Related Articles
Choosing Dividend StocksFacts About Online Stock Trading
Is Penny Stock Trading Right For You Personally?
What Is Meant By Penny Shares?
Ideas To Do Stock Trading
Getting Started With Online Stock Trading Companies
How Is Day Trading Totally Different From Other Trading Methods?
Can You Truly Make 100 Percent Annual Returns On Your Stock Trading Account?
