One of our member/student wrote a valuable comment about sideway/choppy Market.
I would like expand on it. Market has various stage which includes Recovery Stage, Accumulation stage , Bull Stage or Run up stage, Consolidation stage that can turn into next Bull stage or turn into Distribution or Sell stage.
Trading Recovery stage is fairly easy as stock will eventually bounce after sell off. After consolidation or accumulation Bull stage will continue in the direction of the trend and easily tradable. Distribution stage is fairly easy as any spikes up or break downs will be shorted and if you are playing long during distribution , that is contra trend trading and you need take your profit quicker than usual as the bag holders might sell into spikes and cut their losses.
Out of all the market stages mentioned above, it’s the Accumulation and Consolidation stage, trading becomes difficult. This is where most traders lose their gains that were earned from Recovery or Bull Stage. In terms of day trading this where we tend see choppy trend less action. Stops gets taken out after entering a trade only to see stock it recovers after hitting our stop loss. Price alert or break out alert will trigger only to see it fail or being stuck in a range. Key to surviving theses stages is less trades or smaller position size, day trading playing intraday momentum name that running due to earning or news. Do not get sucked into trading just because they set up looks great. Be skeptical about the setup and the success. If the break out alert is 15, do not hit buy button if you see the stock hitting 15 from 14.50. See what it does at 15, whether it fails and traders who bought at 14.50 sells their position as target trade. Execute only if you see base at 15 with expanding volume and keep your stop tight.
Even though most of our members focus on short term momentum trades. It is essential to recognize the broader Market stage and where is Market in terms of those cycles.
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