Are You Not Seeing the Wood for the Trees? —
Weekly Ramblings of an Australian Stock Trader - incorporating
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Are You Not Seeing the Wood for the Trees?

Amongst the first errors new traders make when they begin trading in the stock market is putting in a lot of wasted time and effort into anticipating trends. Numerous traders nowdays are using very complicated formulas, indicators, and various other systems in order to help them to identify possible future trends in the market place.

Therefore it is not surprising that they invariably end up with plotting so many indicators on a single chart that they end up so confused that they can’t even see the share prices any longer. The trouble here is that they have lost sight of making a simple basic decision about when to buy and when to sell. Hopefully at a profit.

The mistake a lot of traders are guilty of making is when they are trying to accomplish too much at once. The major problem here is that the trader has the attitude that the more complicated their system is the easier it will be at “predicting” trends. This is all but a pipe dream..

Often when a trader is relying too heavily on a elaborate system it can make them completely lose sight of the fundamental basic principle of trading. Which is of course buying when the market is going up and selling when it’s going down.

Since the main aim is for you to buy and sell early in a trend, then obviously the most important thing to discover is actually when a trend begins. Using to many complicated indicators at once can only obscure this vital information in other words they end up that can’t see the wood for the trees.

One of the best and most reliable system you can ever use use is your own two eyes.

To put it quite simply this Mark one eyeball system is one of the easiest ways to identify any trends as they occur and by using these trend lines to help you to set up your future trades.

These trend lines are just ways to let you know when you are actually seeing an up trend. These trend lines are basically seen when prices make a series of higher highs and higher lows and the opposite occurs when looking for down trends. This is when prices show lower highs and lower lows. I like this to have happened for at least three days consecutively.

All trend lines do is to show you the lower limits of an up trend or the upper limits of a down trend and, most especially, this can then assist you to see when a trend is just about to change direction.

With experience and time you will get more comfortable plotting these trend lines with which you will then be able to use them to decide when to start taking action. Only after using these early indicators should you start using more specific strategies to determine your exact buy or sell points.

The technical indicators like Moving Averages and the Relative Strength Index (RSI) are some examples of the more complex indicators which are commonly used, but I would only use them for verification only after you’ve first determined whether the market is trending or not.

Happy trend trading.


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