Saturday, August 25, 2007

Important Chart pattern for stock trading

For an average investor it may be difficult to do the necessary research on a particular company and find out if it is worth investing. But he can invest in a company by knowing certain chart patterns without the need for the company’s details. What makes it different is that it helps make decision based on investor sentiment.

Investor sentiment varies from time to time. So is the price of a stock. When times are skeptical the stock will start range trading. After the skepticism is over it rises again. This is the most important chart pattern. Whenever we find a stock to be range trading, it means that the stock is preparing for the next move. Most the times the move will be upwards which means that for example if you trade 10 different stocks 7 may go up and other down after buying.

Here patience plays an important role. In my experience I have seen that the stock goes up by min. of 10% after range trading. But when the move will start is uncertain. Sometimes a minor down move may occur. Be patient till you reap more than 10% gain, even if it takes four months. This is what I am currently testing. After four or six months I can analyze my trades and find out the average return.

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