How to identify a stock market bottom ?

 

Welcome back to our blog today in this learning video we will share our one pattern like other breakout trading patterns e.g. channel, triangle and other patterns. 

This blog is interesting because when market is going to reverse from the top or bottom what are the signs the we need to look ? what are these signals we need to identify so that we can identify the top or bottom of stock market so lets discuss . 

Trend

1. Many people think that we can find the bottom and top of stock market this is their mistake
2. No one can identify the bottom or top of stock market maybe you can identify the top or bottom one time of two time that is by just luck so don't do it.
3. Our goal is to identify the trade near the reversal point 
4. To identify the market top and bottom we need to learn what is trend in stock market?
5. If market start from 1 and move to 4 . reverse back to 2 and the move again to 8 this this of movement is called uptrend 

Uptrend

1. This structure is called uptrend 
2. When market moves higher and don't break the previous low  and cross the previous high we can define the trend as uptrend
3. how market moves in uptrend ?
4. Lets say stock price moves from 100 to 200 
5. Buyers A from the point of 100 generate the 100% profit . At 200 buyers A start selling the stock .
6. There are many buyers at different points and some people misses the stock earlier 
7. When stock start falling the left out buyers start buying first then again stock start crossing the previous high. 

How to find the reversal?

1. As explain in previous example stock moves from 100 to 200  then 300 then 400 then 500 but at some point buyers are not confident no one has left out feeling and no one is interested to average their stock. In that case stock breaks the 400 level if stock closes below the level of 400 this it he first sign that stock price is going to reverse.
2. This type of pattern in stock market is called higher high lower low pattern 
3. If stock price continuous in the direction it is always good but is it fails to hole its structure the we need to go with the trend

Downtrend

1. downtrend start when stock price fails to cross previous high
2. If stock moves from 100 to 500 and enable to cross the 500 point and crosses previous low of 400 the the stock will start in downtrend 
3. Next time when stock price tries to move above 400 it will face new resistance because the previous buyers at 400 start selling 
4. When stock price is not attractive and new buyers are not interested in the price due to high number selling quantities stock price will never cross the 400 marks and even makes new low.
5. Now the stock price moves near 300 level . This structure is called lower high lower low because previous high is 400 and new low is 300 
6. When stock price again crosses the 300 level and close at 200. some buyers are interested because they can see the potential in stock to move 500 in future
7. Next time when price reaches 200 level neither other sellers are interested to sell the stock at such level and more buyers are interested to buy the stock therefore no of buyers for stock increased
8. Which pushes the stock price above 250 level and lower high lower low structure is now now followed because stock is now trading above 200 level.

Important questions for retail investors

1. Do you plan your trade before the market opens?
2. How important for you to calculate your risk?
3. What is overtrading?
4. What was the motivation you become the trader?
5. Do you have the explanation for your trade decision why you buy or sell?
6. Do you have any trading strategies?
7. What is the success rate of your trading strategies?
8. How you avoid the emotional trap?
9. Do you identify the driving force for the market?
10. Do you try to hide your losing positions and show your winning position?
11. How you react when your trade goes against you?
12. Do you try average losses?
13. Do you decrease your trading volume when you are loosing?
14. Do you increase your trading volume when you are winning?
15. When did you decide to cover your positions?
16. Do you have a trading system for trading?
17. What percentage of your trade is based up the trading system?
18. Do you have any trading rules?
19. Smart money vs Dumb money in the Stock market
20. The truth of the brokerage industry, Trading expert & retail traders

How to identify a stock market bottom ?

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