How to use market breadth to profit | stockbee


How to use market breadth to profit

Momentum is good but excessive momentum leads to exhaustion. One of the simplest indicator to find excessive bullishness is number of stocks up 50% in a month. Once it reaches a readings above 20 in next 1 to 2 weeks you will see selling . 

You can see this for yourself in the data going back couple of years. 

Few days after the readings hit 20 plus it was followed by selling as you can see two 300 plus negative days on 7/7 and 7/8.

Another example of this same thing in March above.

Every Time you see the number go above 20 you have to get cautious. In this case the number is just approaching it. You will discover sooner or later in next few days heavy selling occurs.

This is a very simple tool which will allow you to stay out of trouble and be warned in advance. Accordingly you can take profit , tighten stops on existing positions or reduce open risk. If you do that you will not be surprised by market weakness. It is used by lot of members and ex members of stockbee. It gives you ample warning of possible potholes ahead.

Two days ago I posted a video  on members site pointing out this number and warning them to be cautious and look for signs of excessive bullishness leading to possible exhaustion or selling. Last two days market action looks like exhaustion on some momentum stocks. So far selling is contained but the idea behind tools like these is to proactively take action. 

I closed most trades for profit yesterday early  morning. All of them would have ended up giving back profit if I had waited for market weakness to show up. By end of the day they gave up all gains.

The secret to making and keeping your profits in swing trading is to identify good and favorable periods for swing trading and ahead of the time identify likely risky periods and change your strategies accordingly. If you do that you do not suffer drawdowns, you do not suffer from psychological problems and you are happy trader.

If you are a motivated trader who really wants to make lot of money trading and prosper for many years learn about market breadth and how to use it to find turns in market. There are many ways in which you can use breadth to stay ahead of the game. That skill can save you and make you ton of money and best thing is these tools are simple to use. Anyone can do this once they understand the core concept behind these.

If you want to make money trading learn about market breadth and how to use it to profit.

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