| Every successful stock market trading system is | | | | action. Use a trend following tool such as either |
| comprised of three critical elements. In this article, we | | | | moving averages or a MACD histogram to tell you |
| will examine the first of these components. As with | | | | whether you should buy or sell the stock. |
| anything that is to be constructed in a robust | | | | Probably the easiest way to do this is to plot 20, 50, |
| manner, the first part of a trading system is its | | | | and 100 period moving average lines on the chart. |
| foundation. | | | | When the lines are layered probably to support a |
| Most stock traders and investors spend the majority | | | | bullish or bearish trend, then you will know whether |
| of their time studying the daily action of equities. | | | | this stock is a potential buying opportunity or a selling |
| They closely watch the price action on daily charts. | | | | short opportunity. If you are fairly new to trading, it |
| This is perfectly fine if you are built your foundation | | | | is recommended that you stay away from sell |
| first. And the foundation is the prevailing trend of the | | | | stocks short as this is a totally different animal than |
| stock you are watching. | | | | buying stocks. |
| The very first chart you should look act are those | | | | Now that you have built the foundation of your |
| that depict the long range price action of your stock. | | | | trading system, you will be ready for Part 2. |
| When we say long range, we are talking about | | | | However, do not take any action until adding parts 2 |
| looking at charts that span one year or more. Do not | | | | and 3 to your trading system. |
| look at daily price action, look instead at weekly price | | | | |