likely to stick to prescribed ranges. If there are no strong signs of trending
use with caution.
Retracement strategy
To properly implement this strategy, it is important that you are able to
determine a likely pattern for the price of the
stock to continue trending
towards. To take advantage of this fact, you
wait for each price increase
before the inevitable decrease which comes as some people sell and others
try and trade the opposite. You sell on the high and use the profits to buy
back in at an increase of shares under the assumption that it will rise again.
Then you simply repeat until you are no longer sure of the increase.
This strategy will only work effectively when there is something major
enough to cause ripples across the market that are not felt all at once. This
strategy will become less effective the unsure
you are about additional
jumps in price and should therefore always be used carefully. You may be
tempted after seeing a single large jump from a stock to try and employ this
strategy but beware of using it flippantly. Stay strong and you will turn a
profit.
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