At TraderLion, we identify an uptrend as stocks/markets that trade ABOVE a RISING 21DSMA and 50DSMA.
A downtrend occurs when stocks/markets trade BELOW a downsloping 21DSMA/50DSMA.
Let's look at an example 👇
4 Simple Steps to Avoid Downtrends 📉 (a thread)
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At TraderLion, we identify an uptrend as stocks/markets that trade ABOVE a RISING 21DSMA and 50DSMA.
A downtrend occurs when stocks/markets trade BELOW a downsloping 21DSMA/50DSMA.
Let's look at an example 👇
Swing Traders: when markets/stocks are above the rising 21D
Position Traders: when market/stocks are above the rising 50D
We can take this one step further by understanding what a Power Trend is 💪
✅ Low > 21ema for past 10 sessions
✅ 21EMA > 50SMA for at least 5 sessions
✅ 50SMA slope is positive
✅ Market closes up
This is a key component to avoiding downtrends and losing money altogether.
Our most recent follow through day is a great example of how NOT having clear leadership groups leads to quick failures of uptrends.
If the rally itself isn't broad, it is hard to sustain!
The groups that stoodout the most were Software & Electric Vehicles 👇
$NET $TWLO $TSLA $BLNK
$PINS $SNAP
Tracking if your recent trades were winners/losers/breakeven allows you to see if what you are doing is working on a net basis.
If you last 10 trades have all been winners or breakevens, you are in a strong environment.
Ultimately this step is the most important because this directly relates to your hard earned money.
If you DO want to develop a feel for trading a corrective market, SIZE DOWN.
1/8 of your normal size should allow you to do this without hurting you in a big way.
Traders overlook the importance of MC while we are focused on the pursuit of maximizing our Equity Curves.
We can't do one w/o the other!
If you want more similar content, please follow us @TraderLion_
Let us know what your best trick is to avoiding downtrends 🔽
More from TraderLion 🦁
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How to time the market (thread)
There is the old saying that “Time in the market beats timing the market” The chart below from Dr. Wish’s @WishingWealth presentation at the @TraderLion_ conference shows that to be false.
Full presentation: https://t.co/o2f21GBXci
The green line is unattainable realistically, however, missing volatile times during corrections yields better performance than buy and hold and we can aim for the green line.
Investors usually only show the gray and red results.
More
There are many strategies for investing/trading in the stock market operating within different timeframes and with different objectives.
That is of course what creates a market and opportunity. Timing the market may not be what works for you or what fits your goals/lifestyle.
However, everyone involved in the market is here to make money over time and corrections can cause huge drawdowns in the high alpha names negating incredible performance during strong market uptrends.
There is the old saying that “Time in the market beats timing the market” The chart below from Dr. Wish’s @WishingWealth presentation at the @TraderLion_ conference shows that to be false.
Full presentation: https://t.co/o2f21GBXci
The green line is unattainable realistically, however, missing volatile times during corrections yields better performance than buy and hold and we can aim for the green line.
Investors usually only show the gray and red results.
More
There are many strategies for investing/trading in the stock market operating within different timeframes and with different objectives.
That is of course what creates a market and opportunity. Timing the market may not be what works for you or what fits your goals/lifestyle.
However, everyone involved in the market is here to make money over time and corrections can cause huge drawdowns in the high alpha names negating incredible performance during strong market uptrends.
