Stock Trading Predictions & Technical Analysis: When to Average Up?

Tuesday, September 15, 2009

When to Average Up?

First of all let me say that I have never averaged up, but this doesn't mean I may never do so. Most people do the mistake of averaging down, and traders who do this usually are down big and hoping to gain back their losses. Averaging down is a losing strategy, and you should never average down. When should you average up, if you wish to do so? Although I'm not encouraging, nor am I discouraging it, but more aggressive traders may want to average up. If for example we use the chart of my last post of MOT, where we have gotten 2 consecutive buy signals, this is what you should consider as an opportunity to buy more shares, if you were already long after the first BUY signal. Averaging up during a 2nd BUY signal is less risky as buying during a HOLD.

2 comments:

leonidasSeptember 15, 2009 at 8:51 PM
I definitely agree with you. Do you ever look into news and stock earnings releases? Or do you mainly stick to your graph analysis?
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YoelSeptember 15, 2009 at 8:56 PM
I do not look at earnings releases, simply because I'm a swing trader and just ride the trends, and believe everything can be depicted in the charts. Looking at fundamentals is useful for investors, not much for traders. News or fundamentals is what ride stocks, but I believe everything can be read in the charts. Fundamentals helps you decide what stocks to buy, while technical analysis allows you to know when to buy.
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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.