In the world of trading, there is a common phrase that is often used when discussing market trends: "selling on top" and "buying on the bottom" on intraday .
This strategy is based on the idea of entering in a position in a market trend in order to maximize profits while minimizing losses while market is in trend. By the way, make sure you know the trend.
When the market is in an uptrend, traders who missed out on buying at the bottom can enter when existing traders book profits.
So the question is, when did the existing traders book their profits?
We assumed that when the price approached resistance, retail traders decided to take profits. Prices fell slightly as a result. If we are confident that the price will break through the resistance, we should enter at this point.
Similarly, in a downtrend, traders who missed out on selling (a short position or put option) at the top can enter when existing traders book profits.In the same way, when retail traders decided to take profits. Prices rose slightly as a result. If we are confident that the price will break through the support, we should enter at this point.
To understand this concept better, let us consider an example. Suppose the resistance level of a particular asset is at 200 and the support level is at 100. In this case, an aggressive trader might consider averaging or entering a fresh position at around 150. This means that the trader would buy in smaller amounts as the price of the asset increases, ultimately averaging their purchase price to around 150. The idea behind this strategy is to minimize risk while still participating in the uptrend of the asset.
On the other hand, a safe trader might consider averaging or entering a fresh position in at a lower price point, such as 120-130. The goal is to purchase the asset at a lower price point in case the price falls further than expected.
It is important to note that there is always a risk involved when trading, and market trends can be unpredictable. Therefore, it is essential for traders to conduct thorough research, analyze market trends, and use risk management techniques such as stop-loss orders to minimize their exposure to risk. Additionally, traders should consider their own risk tolerance and investment goals when deciding whether to adopt an aggressive or safe approach to averaging in or buying fresh position.
In conclusion, "selling on top" and "buying on the bottom" are common strategies used by investors/traders in market trends. These strategies aim to maximize profits while minimizing losses, but they require careful analysis and risk management to be successful. By adopting a well-informed approach to trading, investors can increase their chances of success and achieve their investment goals.
This strategy is based on the idea of entering in a position in a market trend in order to maximize profits while minimizing losses while market is in trend. By the way, make sure you know the trend.
When the market is in an uptrend, traders who missed out on buying at the bottom can enter when existing traders book profits.
So the question is, when did the existing traders book their profits?
We assumed that when the price approached resistance, retail traders decided to take profits. Prices fell slightly as a result. If we are confident that the price will break through the resistance, we should enter at this point.
Similarly, in a downtrend, traders who missed out on selling (a short position or put option) at the top can enter when existing traders book profits.In the same way, when retail traders decided to take profits. Prices rose slightly as a result. If we are confident that the price will break through the support, we should enter at this point.
To understand this concept better, let us consider an example. Suppose the resistance level of a particular asset is at 200 and the support level is at 100. In this case, an aggressive trader might consider averaging or entering a fresh position at around 150. This means that the trader would buy in smaller amounts as the price of the asset increases, ultimately averaging their purchase price to around 150. The idea behind this strategy is to minimize risk while still participating in the uptrend of the asset.
On the other hand, a safe trader might consider averaging or entering a fresh position in at a lower price point, such as 120-130. The goal is to purchase the asset at a lower price point in case the price falls further than expected.
It is important to note that there is always a risk involved when trading, and market trends can be unpredictable. Therefore, it is essential for traders to conduct thorough research, analyze market trends, and use risk management techniques such as stop-loss orders to minimize their exposure to risk. Additionally, traders should consider their own risk tolerance and investment goals when deciding whether to adopt an aggressive or safe approach to averaging in or buying fresh position.
In conclusion, "selling on top" and "buying on the bottom" are common strategies used by investors/traders in market trends. These strategies aim to maximize profits while minimizing losses, but they require careful analysis and risk management to be successful. By adopting a well-informed approach to trading, investors can increase their chances of success and achieve their investment goals.