A disciplined and successful trader will have 3 important criteria for every trade, which are an entry, a protective stop and a profit objective. There are many different ways of selecting and measuring these three parts.
The technique in handling these three parts will determine your success as a trader. These entries and protective stops are dynamic. They flow with the stock market. A successful line change with market stages at the beginning of the stage 2 – mark up, is the best entry for all traders.
The trader simply follow the stock market and let the stock market tells you what to do. Remember the stock market is your master. This method, just as my method for entries and protective stops is dynamic and simple. It flows with the stock market action.
Stock market action shows that shares will be in congestion or trading range at least 80% of that time. The reason is simple. The reason is price discovery. Once prices find a level at which trade is facilitated they will remain in that range until new fundamentals alter the supply or demand balance. Then the stock will trend to a new level at which trade is facilitated once again.
Most trading range breakouts fail because they are caused by insider manipulation to trap new buyers in thinking that a new trend is beginning. Once the new buyers are trapped, the manipulators will reject the higher prices and pull the stock back into trading range.
It is a reality if trading that stock market spend most of their time in trading ranges. Once in a while, stock markets trend and that is where the big money is made. In order to benefit from both congestions and trends, always divide trading position into 2 parts, whereas trading range part and trend half part.