If you’re new to the strategy of trading stocks, this may seem complicated to make sense of. The reason for the complexity is that there are two main elements in a proper stock trading strategy:
A move in price with long-range momentum (or risk-taking) which helps to generate profit by driving high-level momentum for long-range traders; and A move in price with long-range momentum which helps to generate profit by driving high-level momentum for short-range traders.
These two elements work in parallel.
A move in price with long-range momentum drives high-level momentum for long-range traders, which pushes the price lower on a daily basis, bringing the short-range trader higher. The lower price pushes the price higher again, bringing the two traders closer together, creating a momentum chain.
Example 1: A strong rally in price from January 1 to February 2
The first element of a successful strategy, in conjunction with the second, is long-range momentum. This involves keeping your strategy in motion for several weeks with a solid rally in price.
Long-range momentum can be achieved by the following actions:
A continuous high volume of buying and selling for long periods of time;
The creation of new long positions in your account by short sellers, who have the ability to drive an upward movement in price without taking a profit (see also the section on arbitrage); and
The manipulation of exchanges, particularly when the stock has been rising rapidly for several weeks and has been used to drive price.
With the creation of new long positions, you can then exploit the lack of long-term momentum in the market.
Example 2: A strong rally in price from December 20 to 21
The second element of a successful strategy, in conjunction with the first, is long-range momentum. This involves holding one or more positions for a long period of time. As a result, a trader is able to create long positions while the stock’s price remains high. Long-long positions, which have a high probability of being settled before the market clears by the close of trading on the day in question, give the trader a chance to exploit the high volume of trading activity, taking advantage of the short-long momentum. Conversely, if the trader sells short immediately after the stock’s price hits a high, he may generate large profits.
Example 3: A strong rally in price from November 30 to December 1
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