Beginners Stock Trading Tips – Remove Price Data and Display the 20d
New stock traders can increase their probabilities of identifying winning stock picks by employing these very simple stock trading tips. Remove price action to better understand the underlying trend, then ask yourself two questions.
Traders Tip # 1 – “Is the stock trending?”
If you’re constantly plagued by picking the wrong stock, we suggest removing price data and focus on the 20d. Then ask yourself the second question.
“How far is price action from the 20d?”
Intermediate and advanced traders do this without thinking. If price action is too far from the 20d we will usually wait for a pullback.
Identifying the trend and a good place for entry will increase your probabilities of executing more winning trades, with an added benefit of improving your consistency.
Walmart (WMT) Is the Stock / 20d Trending?
Without question, we see the 20d moving average was in a bearish trend from the February peak through March, then flattened somewhat in April, May, and June.
WMT started a bullish trend in July, then took a breather as it consolidated those gains in September. As the 20d moving average began to flatten, Bollinger Bands collapsed and volatility dropped. The stock was set up for a potential trade.
These two observations prepared us for a move. The direction was not known into October, so an alert trader would need to wait for the 20d to confirm any thoughts of entering into a position at this point.
Once the 20d started moving higher, we assumed a bullish trend would be the proper bias. Depending on your style, we would enter on a breakout, a pullback after a confirmed breakout or a touch of the 20d moving average.
In a trending situation, we like to confirm the first pullback will continue trending higher, by waiting for a bullish follow-through day.
Trading short would have made no sense. More on this in the next example where we examine WTIC.
Walmart (WMT) – Identifying the Trend
On Monday, October 22, we added Walmart to our watch list and outlined the reasons therein. In brief, we saw the 20d turning higher and Bollinger Bands expanding top and bottom. Taken together these two criteria identified a potentially expeditious move in a bullish direction. Read the post for more detail.
A couple of days after notifying members, we also posted our comments on StockTwits. Note the stock is 8% higher from our entry. Earnings are scheduled for November 15.
Walmart (WMT) – Price Action Enabled
If we overlay price action, we see the tips outlined above identified the correct trend. Volatility worked for us on this trade as well, with Bollinger Bands expanding rapidly.
Momentum is clearly bullish and MACD is above its signal line. Volume is icing on the cake. The latter shows institutions are interested.
Bonus Trading Tip # 2
Since new traders also have a problem of taking profit too soon, we suggest employing “The Double Bollinger Band” strategy. Displaying standard deviation one and two allows a trader to stay long until price action closes inside of standard deviation one (darker bands). Until that happens, stay long.
Crude Oil (WTIC) Bullish Trend or Bearish?
Obviously, in this example, a trader would be short crude, as the trend is clearly bearish. Attempting a bullish trade under these circumstances would be a fool’s errand at best. Only a professional would contemplate a counter-trend trade and would most likely do that intraday if at all. Note the 20d crossed below the long-term 200d.
Try employing these simple techniques before taking your next trade. These tips will help send you in the right direction from the start.
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