Buying on Lows: Buy Low, Sell High

This spread betting strategy is used when the market is generally bullish. You must look for positive signs in the stock or security, and in the sector, if appropriate. You’re trying to find a security which has a sound basis for the uptrend it is in.

Most financial instruments don’t go straight up in an uptrend, but have retracements which give back some of the gains. There are several theories on how much the price will retrace before resuming the trend. The least you will see is about 33% if it is a true retracement, rather than just a fluctuation. The most you should see is 67%, or two thirds, as if it is more than this it may be a change in trend rather than just a retracement. You can also see retracements giving back about 50%, or half of the gains of the current push.

For this strategy, you wait until there is a clear retracement in the uptrend, then watch the prices closely, particularly when they approach the levels mentioned above. To decide when the retracement is finished and the trend has resumed, you can set your own guidelines, and for example you may decide it is when the price has risen above all the highs of last week. You can place a trade with the stoploss below the lowest levels on the recent chart, and exit with a trailing stop.

“I don’t understand the logic of people that look to guess buy the bottom, not suggesting anybody in particular just talking generally. No two ways about it people do try and guess buy tops and bottoms and trade against the trend and more crucially continue to hold their position when their trade is a wrong one and watch as their position goes further against them. They even make further mistakes by adding to a wrong position in the hope they will find a new bottom/ top and bail out their original position. This again will usually turn bad. I would rather miss out a certain percentage of a turning point until it is a confirmed change in trend and then trade as opposed to fishing for the magical top/bottom holy grail! Aiming for tops and bottoms is fantasy trading; just getting a slice of the pie is good enough for me, although a large slice is always better ;)”