How to Trade Stocks and Invest in the Stock Market Part 5
Last week, I provided some essential tools that I used to identify trends.
Let’s review the main points:
We want to follow the trend.
A trend is series of higher highs and higher lows that are best identified on a chart.
We need an effective charting platform to identify trends. My favourite is TradingView.
Instructions to set up Daily and Monthly Chart templates with three Simple Moving Average indicators.
Our Daily template uses the following Simple Moving Averages
20- period;
50- period;
200- period.
The Monthly template uses the 30-,40-, 50- period Simple Moving Averages.
A rising moving average indicates an upward trend, whereas a falling moving average indicates a downward trend. The moving average is a lagging indicator helping us identify a trend after the trend has begun.
I require the following conditions when identifying upward trends:
Each of the moving averages is rising;
The moving averages are aligned as the short period is above the intermediate above the long.
When using the Daily template, consider describing our three moving averages as short (20), intermediate (50) and long (200).
If the above conditions are true, then I consider the trend on the Daily chart to be strong, and I begin looking for an opportunity for a Swing Trade.
We can use apply the same conditions for a Weekly chart using the short (30), intermediate (40) and long (50) moving averages.
Naturally, we can reverse those conditions to identify downward trends.
Ultimately, Trend Followers will identify trends in a strong upward trend on multiple timeframes, where the conditions are present on both the Weekly and Daily charts.
Trend Following is the most uncomplicated and most effective trading or investing strategy.
Now that we can identify a trend, does it make sense to get on it?
In future articles, I will discuss the following that will provide you with the knowledge to manage your investments:
The terminology used in the market place used in future articles;
Understanding market structure and how all markets (stocks, bonds, commodities, foreign exchange and cryptocurrencies) behave the same way;
How I identify trades for investments using Technical Analysis;
Risk management strategies that I use;
What I believe is the Holy Grail of trading and investing (it is not what you think);
Several winning and losing trades demonstrating entries and exits.
You can read the Klarenbach Report on Subtack https://klarenbach.substack.com/.
My Klarenbach Research Telegram Group is where I provide Trade Ideas and analyze your ideas. https://t.me/klarenbachresearch.
If you enjoy discussing the market, you can reach me at trent.klarenbach@klarenbach.ca or my website https://www.klarenbach.ca.
Trent Klarenbach, BSA Agricultural Economics, publishes the Klarenbach Report newsletter and the Klarenbach Research Swing Trading Telegram group.