Why to Stay With the Trend

It is common to want to pick the bottom of a stock in order to get in before a trend starts. But that does not make it the most profitable route to go. It is a far better strategy to stick with the trend of a stock until it ends for the following reasons. 1. High probability If a stock has been trending up and building momentum there is a good chance that rnit will continue to keep going up at least in the short term. The odds of it suddenly switching directions are pretty low. So it is better to stick with a stock regardless of your personal beliefs. 2. Stocks Can Stay Overbought/Oversold For a long time Stocks can stay overbought and oversold for years. You may find a stock that is trading at $120 and there is no rational explanation why they are trading so high. But if it is still going up there isn’t a good reason not to take the trade. 3. Easy to Cut Losses It is easy to figure out when you are wrong, especially if you buy a stock when it is near support. If the stock goes against you, you can easily get out and take a small loss. If you where trying to counter trend trade on the other hand it would be harder to cut your losses because every move to the downside makes the trade look better. 4. Hot can Stay Hot Now I know that in the long term an overvalued stock will probably come crashing down eventually. But a hot stock can stay hot for months and years. In short term trading they can be a goldmine. For more on momentum investing visit http://www.stocks-simplified.com/Momentum_Investing.html For more on why not to pick falling stocks visit http://www.stocks-simplified.com/Catch_a_falling_knife.html