Did You Know That Stocks Always Leave a Trail Behind Them

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There are Six basic steps and some irrefutable laws that pertain to the marketplace that every Trader must know to guarantee not only their trading success but their continuing profits in the stock market.

It would surprise you how often this applies to the stocks that are traded every single day in the stock market. In saying that, please bear in mind that the time factor will vary differently with each and every stock.

Step 1:

A Typical stock price's move usually begins with the smart traders who have acquired insider knowledge that relates to a particular stock in the market. This information will move the stock price either up or down depending on the insiders' information. These traders are very smart and they have learned to recognize trading opportunities very early on in the stock's trading cycle.

Step 2:

It can be hours, days, weeks, or even months after a price move has started, that there may be a brief mention in the electronic media or on one of the internet chat boards that a stock has moved. The public on hearing this news for the very first time begins to get interested, but this does not necessarily mean that they will be buying into the stock as yet.

Step 3:

But once a bit more information has appeared in the print media, then this is also the time when the stock's price move also begins to get more noticed on the blogs and internet message boards. This is when the public starts paying a little more attention to the news, and will start to buy just a little bit.

Step 4:

This is the time when the stock brokers go into full hype mode and begin promoting the stock to their own personal customers. This is when the public really takes notice and now begins to buy up the stock in earnest, and at a much larger volume. Consequently the stock price now starts to accelerate upwards at a faster rate due to the shortage of stock available at lower prices.

Step 5:

Because of all the activity that is now occurring, This is now the time that a front-page article usually appears about the particular stock in one of the major financial newspapers, magazines, or financial websites. This can often be three months duration after the original fact occurred. There is often heavy public buying, even a possible buying frenzy, as all media, brokers, and so-called "gurus" start to tout the market.

Step 6:

As step 5 gets fully underway,this is when the smart disciplined traders have reached their preset profit margins and now begin to exit out of the market and begin to take their profits with them.

The inevitable finale of course is the movement of the share prices ceases going upwards, the available stock volume increases so much that it causes the the market price to fall, and investors lose money usually because of hanging onto the stock too long in the hope of squeezing out every last drop of profit.

A tip for you here.

Even though you might not have caught the original news, there is nothing stopping you buying in depending you have done your research, or you may have done research on this stock previously in the past.

I have found that the stocks you know the best are usually the ones that you may have traded successfully in the past. You are more aware of how that particular stock has moved and behaved previously. This is of course to your advantage as against a trader who does not know the stock's history or behaviour as well as you do.

Quite often I will trade a stock till I have made my preset profit, then I will exit when that profit level is reached.Then I will watch the stock in case it retreats downwards, which it quite often does.This is the time I will buy back in again if I can see that the stock has started to trend upwards again.

But in saying that, I usually concentrate on one or two stocks at a time. This is because I have found that having too many stocks at one time, I quite often miss the moves which affects my profit margin.

In closing, not every stock reacts in this manner as portrayed above. You have to treat each stock differently and on it's own merit. But then again it is quite surprising to note that a percentage of stocks do react in this way,so it pays to be aware of how your chosen stock is reacting to outside influences.

Chris Strudwick is a successful share trader on the Australian Stock Market. For more info please visit my blog at www.asxnewbie.com.

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