Buy low and sell high: what does it really mean?
Unless you are new to trading, chances are you have heard it many times. It really is very important too, so if you don’t understand how to buy low and sell high, then this article will open your eyes and give you one of those “oh yeah” moments. My most consistent profits began to appear when I began to focus on this strategy as my number one entry method. Regardless of the strategy you are currently using, if you are consistently making money, you will likely find some way to either enter the market long in key low areas or enter the market short in key high areas.
If you’re still with me and still don’t understand what I’m about to reveal, this is probably the most important article you’ll ever read when it comes to learning how to trade profitably. It doesn’t matter if you trade intraday, daily, weekly or even monthly charts, because prices react the same way on all charts.
I will challenge you to just watch what happens on your charts over a few days or weeks depending on what time frame you are trading. See for yourself if what I am about to talk about is not easily recognizable and negotiable. It’s relatively easy to see on almost any chart once you know and understand what to look for. You can even use weekly and monthly charts and trading options with this strategy if you want to.
First find your key support and resistance areas and draw lines there to help you see them easily. These areas will consist of double tops and double bottoms in many cases, but you may even see prices reverse in these areas multiple times and if so, you can already see what I mean when I say prices will change. they almost always bounce off these levels. You will also find that prices will often reverse trend in these same places. Once you locate these important areas, simply wait for prices to come back to where you are looking to buy or sell.
When you find a strong area of support or resistance, look at it as a great opportunity to enter the market with the ability to buy low or sell high, because that is what you will do. In addition to following one of the most important rules in trading, you will also find that you can enter with a relatively small safety stop, so there is another benefit to entering these places. I’ve gotten really good at this so I often blind buy these areas without thinking about what prices will do when they get there, but if you can’t do this just wait on a trend bar in the direction of your entry. and enter just above that bar if you are going long or just below it if you are going short once the bar has completed and closed.
Once you get in, your goal is to try to get a piece of the trade, because while prices are likely to falter when they hit these important prices, they may not always move as far in the desired direction as we’d like. Every market is different, so keep a close eye on the market you are trading in and study previous support and resistance areas until you have an idea of how much you can safely scalp without staying in the trade too long. If prices normally bounce a dollar off a stock you like, then don’t go for all the money. Try to get half or three quarters of the bounce to keep your win percentages high on the scalp portion of the trade. I like to get out with a safe scalp in the middle of my trade, and then move my stop on the rest of my contracts or stocks to break even and hold firm in hopes that I can make a bigger move. When using this strategy, it doesn’t matter what happens after the scalp is closed, because the operation is risk-free at that point. The worst that can happen is that prices will pull back and eliminate your breakeven point in the rest of the trade. However, you will have made money from the scalp portion of your operation.
Many traders hate seeing trading ranges, because they feel that they cannot make money during these patterns due to the fact that the market is neither moving nor trending. If you learn to understand that buying and selling strong support and resistance is the easiest way to make money, you will start to enjoy and expect these trading ranges just like I do. I often buy the lows and sell the highs of trading ranges multiple times knowing that the odds of at least a small bounce at either end are extremely high. If and when I’m wrong, my stop is small and I lose very little, so I find that trading this way gives me the best of both worlds, which is a very high win percentage and very small safety stops when I’m wrong. mistaken.
If you are not already using this strategy to trade some of the choppy markets, particularly when it comes to ES, YM, and NQ futures, then I highly recommend you get some charts and see for yourself. You’ll be glad you did and it will probably improve your trading results too. Most importantly, you will force yourself to buy low and sell high, which is where real money is made from trading the markets!