Anyone that has been involved in the stock market realizes how important it is to trade with the market trend. Most stocks follow the trend of the market with very few exceptions. With that said, the most important thing a trader can do is locate the reversals in the market. As most traders know, finding the reversal points is no easy task.

Trends occur within other trends. You have short and long term trends, trend channels, and most importantly - trend reversals. Traders that know how to sell short have excellent money making opportunities whether the trend is up or down. Anyone that has been trading for a while has heard the phrase "the trend is your friend", but how many traders have traded against the trend? Why do they do this? Because frequently, when you can see the trend clearly it is close to its reversal. Anticipating the trend before it happens will usually yield the largest profits.

Overall market direction on a monthly basis is frequently used by long term investors, but it is the first step in helping us project weekly trends, daily trends, and intraday trends.

Below is a monthly chart of the NASDAQ composite index I created using our Realtick trading software. Notice how the past three months have made higher lows and higher highs? There is definitely a three month trend to the upside. If trading on Monday (7-29-2000) does not cause the month of July candlestick to go lower than the low of June, our present trend will remain the same. August first could have a big impact on the monthly trend. Suppose August first is a down day that breaks the low of July? That would signify to me that the last three months were a short up trend within an overall market decline. Suppose August 1st opens higher. This would be an indication to me of additional upside, whether the month of August eventually breaks the trend or not. Click the chart below for an enlarged chart that is easier to read.

The slide below shows the trend from the market high of around 5000. If the month of August does not make a new high, then the existing down trend would remail valid and would indicate the confirmation of a bear market. A bear market is only bad for investors who hold stock over night. Daytraders who do not hold over night welcome a bear market because both bull and bear markets have excellent money making opportunities.

If you Can't immediately see the various trend possibilities when looking at these 2 charts, it is suggested that you enter a training program (such as ours, of course) or read the necessary books to develop these skills. Poor chart reading skills are similar to flying a plane with blindfolds on. Remember, your money is counting on you!!!