How to Use Stock Trading Signals

  • April 1, 2019

Watch our video on how to use stock trading signals.

What Are Signals in Stock Trading?

  1. Here's what signals are in stock trading:
  2. Support and resistance is key when trading.
  3. Support shows potential buy signals when going long.
  4. Resistance shows potential sell signals when long.
  5. Resistance shows potential short signal. Support shows cover signal when short.

They are used by traders for buy and sell signals. Technical analysis plays a large part in stock trading signals as well as algorithmic trading. 

Fundamental analysis can also be used for stock trading signals. It’s important to have confirmation from a could of sources.

The stock market is a constant battle of buyers and sellers. As a result, there’s going to be one side this is always losing. However, it’s never the same side each time.

Hence the importance of knowing stock market basics and stock trading signals as they allow you to know who’s about to take control of the tug of war going on.

Stock trading signals take the emotion out of trading. Emotions are ultimately the hardest part to master in trading.

1. Emotions

In fact, emotions have a profound impact on trading. How many times have traders bought a stock that was running only to have it drop as soon as they placed the trade?

How many times have traders sold a stock too soon? It happens to everyone especially with low float stocks. Greed and fear are difficult emotions to master. Hence the need for signals.

Trading can be lucrative when you do it correctly. For that to happen you have to be willing to put in the time and effort to learn. Trading isn’t a gamble or a get rich quick scheme.

In fact, 90% of traders fail and give up. Why? Because they didn’t take the time or put in the effort to study and learn.

They make up just a portion of what you need to learn. Candlesticks, patterns and support and resistance are the foundation of successful trading (check out our different types of stocks page to learn more).

Stock Trading Signals

2. Keep It Simple

Stock trading signals can end up getting complicated. It’s important to remember to keep it simple.

It’s much easier and more practical to manage simple stock trading notifications than intricate ones. Day traders, especially ones who trade low float high volatility stocks, need to make split second decisions. Read our day trading tips post.

Doing that means you can’t spend a lot of time second guessing yourself. You have to be willing to pull the trigger and quickly.

The market trades in cycles and the market changes. Sometimes quickly. Hence complex stock trading signals would be obsolete. Check out our trading service and trading rooms to learn more about day trading and swing trading signals.

3. Support and Resistance

Support and resistance is one of the most important aspects of stock trading signals. These are key levels every trader pays attention to. Read our post on how to draw support and resistance levels.

The real bodies and wicks of candlesticks provide support and resistance. Look at the daily chart of a stock you’re interested in and map out those levels.

Don’t just keep it to the daily chart however. Look at all time frames if and when you’re making a watch list for yourself.

A stock that finds support and holds can be a good buy for a trader. As a result, you can close out the trade when it hits resistance. Support and resistance may be one of the most simple but important stock notifications a trader can learn.

Are Stock Trading Signals Reliable?

  • Are stock trading signals reliable? That all depends on whether you understand candlestick patterns. Candlesticks are the most important trading indicator. They show important support and resistance levels. They enable traders to determine potential buy and sell zones.

Patterns are another part of the trading foundation every trader needs to know. Not only do patterns provide support and resistance but also reversal and continuation signals.

If the stock is in a bearish trend and a bullish reversal pattern occurs, price usually heads into a new trend. The opposite is also true. Since the market turns over, stocks that are bullish will become bearish.

Triangle patterns, head and shoulders patterns and cup and handle patterns are all important stock trading signals.

In fact, the Bullish Bears have entire candlesticks courses dedicated to learning candlesticks and patterns. They are the very foundation of trading. Hence the importance of taking the time to master them as stock trading signals (watch us trade live each day in our trade rooms).

Stock Trading Signals

1. Moving Average Lines Are Potential Stock Trading Signals

Moving average lines are trading signals that many traders like to use. As a result, moving average crossovers provide significant buy and sell signals as well as support and resistance.

The 50 and 200 SMA crossovers are the most popular stock trading signals. The 9 and 20 exponential moving average crossovers are a close second.

Not only do the moving averages crossing provide important stock trading signals, but also price crossing the moving average lines.

The way price moves in relation to moving average lines can also be significant buy and sell stock trading signals. Moving averages provide equilibrium to stocks.

When price moves away from those lines, they end up gravitating back towards them. If price crosses above the moving averages, that tends to be a bullish sign.

If price crosses below the moving averages it’s a bearish signal. Don’t forget to also look and see if the moving averages are still bullish or bearish.

2. RSI

The RSI is another one of the trading signals you can use. RSI tells traders when a stock is oversold or overbought. Read our what does RSI mean in stocks post.

This, in turn, lets you know that a correction is coming. An overextended stock is it not going to stay that way.

Traders will take profits or buyers will come back in. In fact, traders use RSI to confirm the strength of a trend. Sometimes being overbought doesn’t mean a correction happens right away.

Instead the strength of the uptrend is confirmed. However, buying when a stock is overextended means you do need to be careful and mindful that a correction will take place.

The Bottom Line

Stock trading signals are a great way to figure out when traders should buy or sell a stock. Keep it simple and don’t load your charts down with too many indicators, making it too difficult to trade. Sometimes less is more.

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