The Most Important Step in Trading

There are two things I love most about my trading style.

First, I’m able to apply my methodology to any market.

It doesn’t matter if I want to trade stocks, currencies, or commodities. My approach remains the exact same.

Second, my method is incredibly simple.

I don’t rely on a great number of technical indicators. And my charts are clean and easy to understand. Trading is difficult enough without having to complicate your analysis.

Making money from a trade is a very different skillset from reading the market. Of course, it’s difficult to do one without the other.

That’s why today, I’m going to show you how I break down a price chart in the simplest terms possible.

You’ll see how quickly I like to shift gears from analyzing a market to putting together an actionable trading plan.

Let’s look at a chart of Expeditors International of Washington (EXPD) below so I can show you what I mean.

This chart doesn’t have any special indicators or chart patterns. We’re looking purely at this stock’s price action to determine how to trade it.

The best trades are the ones taken in line with the greater underlying trend.

That’s why my first step is to always identify whether the trend is up or down.

The simplest definition of a trend is a series of highs and lows moving together.

As you can see, between late 2021 and October 2022 EXPD has been in a downtrend. This is confirmed by the series of lower lows and lower highs.

In November 2022, however, EXPD broke the downtrend and went on to make a new higher high. This was an incredibly important development.

Breaking the previous downtrend puts me on alert to look for chart patterns that would lead the market higher.

The actual trigger for me to get into a trade could be a bull flag, a falling wedge, a moving-average crossover, or any other number of setups.

I don’t particularly care what kind of setup the market will provide. I just know that what I’m looking for is a reason to go long this stock. That means I’m not looking to buy puts on EXPD.

Remember, I want to trade in line with the larger trend. So long as the market continues to put in higher lows and higher highs, that trend is to the upside.

Right now, I don’t see a clear chart pattern that would give me the green light to trade this market. But I’ll continue to keep a close eye on this stock in case one materializes.

It’ll be a really fun case study if we can follow along this stock’s action together.

For now, just remember that identifying the trend is the most important step for any technical trader.

There’s no need to overcomplicate things. Just look for that series of highs and lows moving together.

Happy trading,

Imre Gams

Would you like to see more case studies like this? Are there any particular stocks you’d like me to review?

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