Knowing WHEN to trade is just as important as knowing what or how to trade.
Weekly indicators like the MACD take priority over daily indicators. Determine the larger trend then trade with the trend.
On days a stock trades sideways, assume continuation of the previous trend.
If you are on the sidelines and thinking about taking an entry in a stock, determine if price stagnation is taking place. It is trading capital that pushes a market one way or another. An oversupply or imbalance of buy orders will push the market up. An oversupply of sell orders will push the market lower. When price stagnation is present (as typically happens many times throughout the trading session), the market and its participants are telling us that, at the present time, they are happy or satisfied with the prevailing bid and offer. You don’t want to be in the market at these times. The market is not going anywhere. It is a waste of time, capital and emotional energy. It’s much better to find a hot market to trade in.
Friday’s are usually a bad day to day trade. Many professional day traders exit their positions on Friday as their boss doesn’t want them to hold positions over the weekend news cycle. Friday’s tend to be lower volume days. Price stagnation is more common on Friday’s than on any day of the week.
Most newbie traders think there are two possible decisions for any given trade: buy or sell. There is a third position: sidelines. Your options are to buy, sell, or sit on the sidelines. Knowing when to sit on the sidelines is just as important as knowing when to buy or sell. If you are having trouble establishing the trend within your optimal trading time frame, jump out one time frame. If you still can’t determine the trend, sit on the sidelines until the trend becomes more apparent. If an earnings announcement is coming within the next day, it’s usually best to sit on the sidelines until after the earnings announcement rather than to take a position a day or two before. Many newbie traders get blind-sided by earnings announcements, don’t be on of them. If the Fed is going to take some key action that will impact the markets it’s usually best to sit on the sidelines until after their action rather than trying to game their action.
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