Using Trend-lines to make Buy and Sell Decisions?

D

DisgruntledTaxPayer

New member
Joined
Sep 13, 2009
Messages
4
Reaction score
0
Points
1
So I'm thinking of getting in to single stocks for fun, but I will be testing these waters based mostly on my growing knowledge of trend lines. But I'm very confused. I was looking at this website which gave this picture to explain the use of trend lines:

http://www.liberatedstocktrader.com/pics/uptrends-drawing-trendlnes.jpg

Its very easy to look at historical trends and say, "Yes, I would/should have gotten in there and gotten out there." But how does one make a decision today based on trend lines? The only thing I've been able to come up with is using a moving average trend, say 100 days. And then I would buy if the stock was up a certain percentage from the trend line, then sell when it breaks the trend line by a certain percentage.

Can anyone steer me in the right direction?
 
Great question.

As Karen said they keep her on the right side of a trend, but it's probably not a complete buy or sell signal. I would also agree with Karen that the market's downward trend may be ending.

You could do as you mentioned and use a moving average to signal buy/sells. Many traders/investors use this strategy as well as MA crosses. There's also a strategy called 50/50 where trader's get into a stock when the price gets over the 50-day MA and the RSI is over 50 as well. Check that out and see if it may work for you.

Determining trend can be done with additional technical indicators. My favorite is the average directional index or ADX. How the ADX may help you better is it rates the strength of a trend on a scale of 1 to 100. A rising line over 25 is considered a trend. A rating of over 60 is really high and may not last much longer. So it gives you a real sense of when to get into a position.
 
Back
Top