Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I'm interested in hearing from you guys on a fundamental question.
Is more money to be made:
- Selling Weakness, Buying Strength
or
- Buying Weakness, Selling Strength
I think the answer to the question will greatly depend on your personality and if you are a with trend or counter trend trader. But I am curious what you have to say.
How do you perceive or measure weakness on a chart? or at what point does P.A. become weak?
How do you perceive or measure strength on a chart? or at what point does P.A. become strong?
Is it not just a cliché similar to the famous "trend is your friend" mantra? Maybe it's time to update the cliché: sometime weakness is your friend, sometime strength is your friend
As we become more experienced, we are more likely to be able to see what kinds of weakness to buy.
For me, I really like to buy the dips but will force myself to not buy on 'obvious' downtrend, overall heavy selling days, especially after big moves up, where we're more likely to have a quick and sharp drop. Like now.
Buying weakness -- via indexes, not individual stocks; more risky -- can be a great way to go, scaling in, using support areas on say, a 60 minute chart and of course, daily charts too. Managing your risk with conservative position sizing, selling into strength, keeping your total inventory never too big.
Agree with the cliche' concept. Some buy into strength. Which one will correct? Depends on what others think. Psychology of the market participants will dictate the correct method, but of course you don't know what that is. Build a complete strategy around a particular philosophy and you'll see whether it's worth it or not through back and forward tests.
Having spent quite a few years studying a method that uses the premiss that increasing volume with increasing price
(increasing price meaning price continuing to move in same direction), and that the price/volume relationship moves in a fractal (waves within waves) nature, we may be able to better see where we will have weakness/strength.
It's very much a matter/issue of context however.
ie: within which leg of which wave/fractal are we.
In theory, we can know which, so we can trade all legs (weakness/strength) of each fractal.
I think we have to clear up a semantic issue first.
There's weakness/strength, and there is relative weakness/strength. You want to buy weakness in markets with good relative strength, and sell strength in markets that are relatively weak. This falls into the trend following methodology and takes into consideration the timing of you trades along with the direction.
If you are trading a range market with a mean reversion methodology, there isn't any trend (by definition), but you are still buying weakness and selling strength, and it still takes into consideration the timing and direction of your trades.
I trade a swing trading system that buys weakness. Of course "weakness" is a vague term; there's weakness and then there's WEAKNESS.
The kind of weakness that I'm looking to buy is the latter. This is the phase when panic has set in, when a stock has made a move several standard deviations outside the norm and traders who bought on initial signs of mild weakness are getting stopped out with heavy losses. In my experience, these moments of capitulation are the best time to enter long positions.
Enter too early, and you'll be the one selling in a panic at the lows. Just my two cents.
