Stock Trading Tips - Why You Should Look For Shares That Are In Strong Trends

The great thing about stock trading is that there are literally thousands of stocks to trade

, and this applies to most stock markets all around the world. However you still need to be selective if you are serious about making money because some stocks are better than others. The best stocks to trade are generally those that are trending strongly upwards or downwards.

This isn't always true of course. There are times when stocks will drift sideways for months on end before bursting into life and breaking out of their trading range, providing you with a good breakout trade. However it's often a lot easier to stick with the mid and large cap stocks that are already in established trends.

These stocks are widely traded and can provide you with some great trading opportunities. The key is to keep an eye on the wider stock market, such as the FTSE 100 if trading UK stocks or the Dow Jones / S&P 500 if trading US stocks, and trade in the same direction as this market.

For instance if we assume that you are trading large cap US stocks, then you want to be looking to go long on a particular stock if the S&P 500 is trending upwards and short when it is heading downwards. This takes a lot of the guesswork out of trading and will generate much better results because you always have the trend on your side.

Many of the most successful traders simply trade with the trend. If the wider stock market is going up they will simply look for stocks that are making new highs and ride the trend. They may also use a few technical indicators for additional confirmation of a potential set-up.

For example if a stock is making a new high and it's supported by the MACD crossing upwards, or the RSI or stochastic indicator crossing upwards through the 50 level, for instance, then this is a very positive sign that a stock is likely to continue moving higher.

Anyway the point is that it's always a good idea to find stocks that are trending in the same direction as the wider market, and trade in the same direction as the trend. You could trade price breakouts or you could simply trade counter-trends where the wider stock market is heading higher but the stock in question has headed lower or remained flat before turning upwards. Either method can yield excellent results and they are both good ways of trading individual stocks.

by: James Woolley

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