In previous article, we have learned how to draw the trendline for stock trading which is a useful tool to know the current stock market trend. As I have also mentioned, knowing the stock market trend is very essential for stock trader – especially for retailers – to gain optimum profit in their stock trading venture. In short, we can make money in stocks by using trendline based strategy. Indeed, this trading strategy is quiet simple which are “buy if the trend is up, sell if the trend is down, and stay away if the trend is nontrend (sideways).
However, you may be still confuse to use these simple strategies since too simple without any specific time to buy or sell the stocks. Therefore this time, let’s make this make money in stocks by using trendline strategy become more detail. Yeah, I call these strategy as Make Money In Stocks by using Trendline. As from previous article, there are three trendlines available which are uptrend line, downtrend line, and nontrend line. From these three trendlines, we can get four strategies which are:
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Make Money In Stocks #1: Sell when the uptrend line is being penetrated down by the chart
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Make Money In Stocks #2: Buy when the the downtrend line is being penetrated up by the chart
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Make Money In Stocks #3: Sell when the bottom nontrend (sideways) line is being penetrated down by the chart
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Make Money In Stocks #4: Buy when the top nontrend (sideways) line is being penetrated up by the chart
For more understanding about this Make Money In Stocks by using trendline strategy, let’s see the detail in below:
Make Money In Stocks #1: Sell when the uptrend line is being penetrated down by the chart
In here, let’s assume that we have drawn the trendline that shows the current trend is uptrend (bullish). Since the market is in uptrend, we have bought the stocks and the price has been increase. Until here, we have done the right step by using the simple strategies which mentioned in previous article but then, what’s the next step? That’s is the most important and essential thing. Is it better to take profit before the stocks price is down or let’s the profit run until the end?
This is very important and essential since the price may continue up after we take profit or in other hand, the price may be down significantly when we decide to let the profit run until the end. It is the big dilemma in here, right? Fortunately, there is the best answer by using the trendline. However, before answer the question, let’s see the chart below:
Click for The Larger Image
As we can see, there is an uptrend line that has been penetrated down (blue circle) by the chart and after that, the price movement decreases significantly. So, from the chart, it should be obvious that the best choice is to sell the stocks when the uptrend line is being penetrated. If not, our current profit may become loss (or at least, significantly decrease) since the price will be down after the penetration point. So, in this situation, the best choice is to “Sell when the uptrend line is being penetrated down by the chart”.
Make Money In Stocks #2: Buy when the the downtrend line is being penetrated up by the chart
In here, let’s assume that we have drawn the trendline that shows the current trend is downtrend (bearish). Since the market is in downtrend (bearish), it is natural that we do not buy the stocks yet (or we have sold our stocks before) and have full case in our hand instead. Until here, we have done the right step based on the simple strategies which mentioned in previous article. However, what’s next step? That’s the most important and essential question for stocks traders.
You may have the answer as like: “start to buy when the trend is uptrend (bullish) again”. However, it may be very late and our profit will be not optimum if we wait the formed uptrend line before buy. Fortunately, there is a best answer for it as below chart:
Click for The Larger Image
As we can see, there is a downtrend line that has been penetrated up (blue circle) by the chart and after that, the price movement increases significantly. So from the chart, it should be obvious that the best time to buy the stocks is when the downtrend line is being penetrated. If not, our profit will be not as optimum as it should be since we late to buy the stocks. It can be possible that our trading result is a loss if we are too late since the price may be down again. So, in this situation, the best choice is to “Buy when the the downtrend line is being penetrated up by the chart”.
Make Money In Stocks #3: Sell when the bottom nontrend (sideways) line is being penetrated down by the chart
In here, let’s assume we have drawn the trendline that shows the current trend is nontrend (sidewayas). Since the market is in nontrend (sideaways), it is obvious that we can either have the stocks or not. Usually, we still have the stocks if the nontrend is after the downtrend (since we have bought it when the downtrend line was being penetrated up) and in other hand, we do not have the stocks if the nontrend is after the uptrend (since we have sold it when the uptrend was being penetrated down).
This time, let’s asume we still have the stocks when the market is in nontrend (sideways). What will be the best option if the bottom nontrend line is penetrated down? Whether to sell the stocks or keep the stocks. The decision is essential since will decide whether we get the optimum profit or big loss. Fortunately, there is a best answer for it as below:
Click for The Larger Image
As we can see, there is a bottom nontrend (sideways) line that has been penetrated down by the chart and after that, the chart movement continuous its down move significantly. So, it should be obvious that in here, the only option is to sell the stocks when the bottom nontrend (sideways) is being penetrated down. If not, only the big loss which wait for us. It is not what we want as stocks traders, right? Therefore, in this condition, the best choice is to “Sell when the bottom nontrend (sidewayas) line is being penetrated down by the chart”.
Make Money In Stocks #4: Buy when the top nontrend (sideways) line is being penetrated up by the chart
In here, let’s assume that we have drawn the trendline which shows the current market’s trends is nontrend (sideways). As mentioned before, in nontrend (sideways) market, we can either have the stocks or not. Indeed, for this scenario, it is not important whether we have bought the stocks or not since we can always buy it again (as long as we still have the cash remains in our hand). However, for simplicity, let’s assume that we have full cash in our hand since the nontrend (sideways) is happened right after uptrend (bullish).
In here, let’s assume we have sold the entire of our stocks since the uptrend line have been penetrated down before. So, if the top nontrend (sideways) is being penetrated, what is the best option for us? Is it to buy the stocks or what? The answer is surely essential to decide whether we will have an optimum stocks trading’s profit or not. Fortunately, we have a very good answer in here. For detail, let’s take a look at the chart below:
Click for The Larger Image
As we can see, there is a top downtrend (sideways) line which has been penetrated up by the chart and after that, the chart movement is continuously up significantly. So in here, it is should be very obvious what the best answer for this situation. Yes, we should buy the stocks when the top nontrend (sideways) line is being penetrated. It can be said that with this stocks trading’s strategy, it is a high possibility to gain the optimum profit in our stocks trading activity. So, in here, the best choice is to “Buy when the top nontrend (sideways) line is being penetrated up by the chart”.
Have a good day to make money in stocks by using trendline everyone!