Types of Trends:
- Channel
- Wedge
- Embedded Trends
Trading with Trends:
- If, having broken out of a trend, a stock re-enters the base, it is extremely likely to make its way back to the bottom of the base. Continue to honor original stop loss level, but consider cutting position size in half.
- Reversals of trend are relatively low risk, and give clear cut sell signals in the event the trade isn't going the right way.
- Breakouts and changes of direction require above average volume to be taken seriously. Of course, other indicators should be used.
- Depending on overall market condition, there may not be enough 'oomph' to really start a rally from a trend breakout. Wait for the retracement to the trend line before getting in for a better risk/reward play.
