Having an early warning signs are good for you and your trading in a stock market. Financial market profits require multiple skills capable of locating suitable risk vehicles, entering positions at the right time, and managing them with wisdom and a strong stomach before finally taking an exit when the opportunity costs turn adverse.
Many investors, market timers and traders can admirably perform the first three tasks but fail miserably when it comes to exiting positions. Hence, you need to consider an early warning signs.
While buy-and-hold strategies work, the addition of exit timing mechanisms can yield higher profits, as they address the long-term shift from open outcry and specialist matching to algorithmic software code that seeks price levels that force most investors and traders to give up and exit positions.
The good news with most trades/positions is that when you see some of those warning signs, they are liquid enough to exit.
This predatory influence is likely to increase in years to come, making long-term strategies untenable.
Keep track of the average daily volume over 50 to 60 sessions and watch three times the volume or more for trading days. Such incidents mark good news when happening in position direction.
Whether long or short and warning signals when opposing the position. This happens especially if the adverse swing breaches a significant level of support or resistance.
Failed Price Swings
Strong trends in both directions allow trade spreads to integrate recent market shifts, enable profit-taking and lower rates of volatility. It is all-natural, and part of the development of healthy behaviors.
However, when it exits the range in the opposite direction of the prior trend swing a trading range becomes a top or bottom.
Price action provides an early warning sign for a pattern change. It happens when a trading range gives way to a breakup or collapse as anticipated. But then, it reverses quickly with the market leaping back into range limits in the process of buy and sell.
Moving Average Crosses and Trend Changes
Furthermore, price action waves a red flag when the intermediate moving average changes slope on long positions. Then, it comes from higher to sideways and on short sales from lower to side.
Do not stick around and wait for the long-term moving average to change slope. Because when it flat lines, a market may go dead for months.
Therefore, it affects to lowering opportunity-cost and trading account.