Buy the bottom and sell the top.
Did you know why many people lose money during trading? They always think that buying at the bottom is always the best strategy, and they never realize what is the trend type? For example, during the downtrend, they identify the suitable positions, and they mistakenly select positions during the downtrend. But the market continuously declined, and when the market reached the consolidation, they lost almost 50% of their capital. Similarly, during the upward trend, when prices touch the top points, they intervene and select the position and hope that they also touch another top position. They are wrong again because there is no guarantee of the continuation of the trend. If the price is not able to cross the resistance level and goes down, how will you save your capital?
The much better approach is to sell when the price rises to an obvious resistance level or the market is weak, and buy when the price falls to an obvious support level and becomes stronger. The uptrend can be identified as prices touch the higher highs and lower lows, and the downward trend can be identified by lower highs and lower lows. In addition, never respect the small fluctuations and noise; it is common in trading. The trend is always clear in the weekly or daily K lines and difficult in the 5, 15, and 30-minute K lines.
Exit too early.
It is also necessary that you only leave the market when the trend reaches its destination. Obviously, leaving the market during the trend development does not cause loss, but you miss the big profit. When the trend moves in one direction and continuously moves upward, it is understood that it must touch the resistance level. Due to some traders’ psychological issues and neglecting a disciplined approach, they left the market and faced an overall account loss.
Participating in a small trend
The short trend is created by many factors like pullback, washout, rebound market, and higher-level downward trend. You need to develop skills to judge these events during your trading session. These events make you trade in the opposite direction. However, the false breakout or false trend is helpful to indicate the correct direction of the trend.
Trend position
During the trading session, there are many retracements, and these are always normal. The best way to deal with these events is to set up your stop loss and take profit, and they are always set according to the trend type. It is also possible a very large retracement forces you to exit from the market, and the market returns to its original trend. You have to develop your skills to face these situations with the help of stop loss and take profit and reenter the market. Don’t worry about entering the market with a higher or lower price because your direction is correct.
Chasing the rise and selling in the fall
Everyone knows an uptrend consists of higher highs and lower lows, but you only make a profit with your position. Only the holding position during the trend-following strategy generates revenue for you. You need to wait until the trend is developed, but it requires you to judge the timing of buying and selling. Without your emotions and unbalanced mentality, take a position with confidence.
When the trading volume increases, it means numerous traders enter the market, and at this time it is also possible for big players to make profits and close their positions. This will lead to price retracement, and other traders are exhausted. So you need to make sure of a good buying point or selling point, and pay special attention to a 40% or 50% retracement during a trend.
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