In stock investment, it is said that the basic principle is to place buy orders on an uptrend. Especially for beginners, it is safer and easier to make a profit when the stock price is rising.
However, since stock prices are constantly rising and falling, it may be difficult to determine when to buy. Also, some people may not know the point to judge the uptrend in the first place.
This time, I will explain the points to judge the uptrend, the timing to buy, and what to do when the reading is off. It is basically the same for virtual currency charts, so please refer to it.
Principles for buying stock
There is a big flow (trend) in stock prices, and they can be classified into the following three types.
- Uptrend: Stock chart is rising
- Downtrend: Stock chart is declining
- Conflict phase: Stock chart is flat with a certain price range
source:SBI SECURITIES Toyota Motor (7203) ChartCreated from
Buying on a downtrend is called “contrarian”. Stock prices are constantly rising and falling, so if you get the timing right, you can make a profit even if you are contrarian. However, as stock prices are on a downward trend overall, losses are likely to increase. Beginners should basically not buy on a downtrend.
In the conflict phase, buyers and sellers are in equilibrium, and the direction of stock prices is uncertain. It is possible to make a profit by observing the timing when the stock price goes up and down, but it is difficult to make a big profit because the price range is small.
As a general rule, when investing in stocks, try to buy in an uptrend.
Points to judge the uptrend
To buy on an uptrend, you have to determine if the stock price is on an uptrend. Here, we will introduce the points to judge the uptrend.
① The candlestick is rising to the right
If the candlestick is on the rise, the stock price is on an upward trend. Even beginners can easily judge because it can be seen at a glance by looking at the stock price chart. However, the state of the candlestick changes depending on the display period of the chart.
For example, even if the candlestick rises to the right in one month, it may fall to the right in the long term such as one or two years. When investing in stocks in the medium to long term, it is important to check both short-term and long-term stock charts to determine trends.
② The moving average is rising
The uptrend can also be judged from the moving average. The moving average is a combination of average stock prices over a period of time, and there are three main types: “short-term,” “medium-term,” and “long-term.” If the moving average is upward, it can be judged as an uptrend, and if it is downward, it can be judged as a downtrend.
“Golden Cross” is a famous way to judge the trend by the moving average. The golden cross is a state in which the short-term line penetrates the long-term line from below, and is said to be a sign that stock prices have turned upward.
③ Volume is increasing
When judging the uptrend, there is also a way to focus on the volume. Volume is the trading volume of stocks that was established during a certain period, and is displayed as a bar graph below the stock price chart.
At the turning point of the trend, volume tends to increase significantly. For example, if the trading volume of a stock that normally does not move much increases and the stock price also rises, it can be judged that the trend has changed to an upward trend.
source:Chart of SBI SECURITIES Kawasaki Kisen (9107)Created from
④ Pay attention to the chart pattern
When the stock chart forms a certain pattern, it may turn into an uptrend. Let me introduce two typical chart patterns.
The double bottom is a chart in which the stock price hits the bottom twice and draws a “W”. When the stock price exceeds the previous high (neckline) after the second bottom, it is said to be a sign of entering an uptrend.
Triangular holding is a chart in which stock prices continue to quarrel and become like a triangle. Stock prices tend to move significantly as the resistance line (upper resistance line) and support line (lower price support line) converge to one point. If the stock price rises above the resistance line, it can be judged that it has entered an upward trend.
One way is to use these chart patterns to determine the turning point of the trend.
Timing to buy on the uptrend
Here, we will explain the timing of buying in an uptrend using a concrete example.
Exceeding the latest high
Exceeding the latest high is a method of buying when the stock price hits the latest high. The latest high price update can be judged as a sign of a shift to an uptrend.
Looking at the chart of Soshin Electric Co., Ltd. (6938), the stock price had been hovering between 550 and 600 yen for a while, but it hit a recent high on August 2, and has been on an upward trend since then.
source:Chart of SBI SECURITIES Soshin Electric (6938)Created from
From the fact that the moving averages form a golden cross and the volume is increasing rapidly, it can be judged that the trend has changed to an upward trend.
Ideally, you should buy at the timing of the high price update on August 2 (buy ①). Even if you miss the timing, if you decide that the uptrend will continue in the future, you can buy around August 5 (buy ②) when the stock price has dropped a little.
Buy a bargain
The bargain purchase is a method of buying at the timing (push) when the stock price temporarily falls in the middle of the uptrend. The timing of bargain buying is determined from the latest highs and moving averages.
One of the buying timings is when the stock price falls and hits the spot, and then exceeds the latest high. If the latest high is updated, the uptrend can be expected to continue thereafter.
There is also a method of buying when the stock price approaches the moving average. If it is a daily chart, purchase when the stock price approaches the 25th moving average (medium-term line). In the middle of an uptrend, stock prices often rise again without breaking below the moving average.
If you check the chart of JEOL (6951), you can judge that it is an upward trend because the candlestick is rising to the right. And it can be seen that the stock price is up and down even in the uptrend.
source:Chart of SBI SECURITIES JEOL (6951)Created from
After making a squeeze, it is a good idea to buy at the timing when the stock price hits the latest high (buying in the red ① to ④).
When judging the buying timing from the moving average line, the buying timing is when the stock price approaches the medium-term line (buying in blue (1) to (4)).
Immediately after the shift from the downtrend to the uptrend
Immediately after the downtrend shifts to the uptrend, it is one of the buying timings. If the stock price rises above the resistance line after the downtrend continues for a while, it can be judged as a turning point of the trend.
If you look at the Orix (8591) chart, you can see that the stock price has turned to an uptrend after a downtrend for a while.
source:SBI SECURITIES ORIX (8591) ChartCreated from
The first buy timing is when the stock price crosses the resistance line (buy ①). The fact that the moving averages form a golden cross is also a factor in determining the buying timing.
It is also time to buy when the stock price exceeds the latest high (buy ②). Since it is difficult to judge whether buying ① will turn to an uptrend, there will be no problem if it can be purchased by buying ②.
What to do if the reading is off
Even if you think it’s time to buy, the reading may actually be off. What should I do if the stock price does not move as expected after the purchase? Here, I will introduce two measures to be taken when the reading is missed.
Nampin buying is a method of lowering the average purchase price by buying more when the stock price of the stock held falls. For example, if you buy 100 shares at a stock price of 2000 yen and then buy an additional 100 shares when the stock price drops to 1000 yen, the average purchase price will drop to 1500 yen.
If the stock price decline is temporary in the middle of the uptrend, buying a pick-up is effective. However, if the stock price does not stop falling, the loss will increase, so it can be said to be a high-risk method.
Stop-loss is to sell and fix the loss when the stock price falls due to misreading. Stock prices fluctuate due to various factors, so they do not always move as expected. If you stop the loss early, the loss will be minimized.
The trick is to decide on a stop-loss line before buying stocks and mechanically cut the loss if the reading is off.
Points to keep in mind when buying on an uptrend
Don’t buy when stock prices are down
Even if it is an uptrend, it is important not to buy when the stock price is falling. If the stock price continues to fall after the purchase and the support line is interrupted in a short period of time, the loss may increase. When making a bargain purchase, make sure that the stock price has bottomed out and turned upward before buying.
Try to stop loss rather than buying Nampin
Beginners should basically avoid buying pick-ups. There is also a quote saying, “A bad pick-up, a source of serious injuries.” If you repeat the numbering because you don’t want to lose, you may increase the loss.
Rather than buying a pick-up, let’s make sure to minimize the loss by stopping the loss. If you really want to buy Nampin, it is important to set a rule such as “up to 2 additional purchases of 100 shares” and follow that rule.
If you miss the buying timing, don’t overdo it
Equity investments cannot be profitable unless they are bought at the right time. With over 3,000 stocks listed on the stock market and trends changing regularly, there are plenty of opportunities.
If you miss the buying timing due to the uptrend, it is important not to force the purchase. Let’s wait for a while and find the buying timing again.
Beginners to invest will make a proactive trade to buy on the uptrend
Even beginners can easily make a profit if the trade is in order to buy in the uptrend. When the stock price is on an uptrend, let’s judge the buying timing from the latest high price and the moving average line.
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