Tuesday, July 3, 2012

A trend that continues

It is the nature of trend to make significant thrusts (in the direction of the trend), then pause, consolidate, even correct, and finally resume the advance by another thrust.

When the trend pauses, a natural question arises: is this a correction or a reversal? As traders, we must always believe that the trend is our friend (this sounds like a filmi dialog, but it is true). We must always assume that the trend will continue unless proved otherwise.

If the trend resumes with a breakout from the existing consolidation, new highs should be within sight. Finally, there will come a breakout, which will fail to reach its targets, cause volatility to increase and eventually make lower highs, lower lows, on lower time frames. This will be the first sign that a real correction is starting.


2 comments:

Nivas said...

You have always advocated to go with the trend does this mean one can take unhedged positions. I always tend to buy some puts to hedge my longs even on a uptrend. Willing to change my strategy. Your thoughts.

Technotrader said...

Sir, I wish to know some points, and if you can put some light, it will be a pleasure.
1. How we can determine the rollovers? and its importance?
2. Sometime we long a stock in Fut, its chart is also bullish but when we see the data on NSE website in derivative segment the seller quantity outnumbers the buyers, why this is so? actually buyers should outnumber sellers.

Thanks sir