Before you start trading, you need to make sure that you understand a little thing called direction. A lot of people overlook the fact that the stock is greatly influenced by the performance of the overall sector that it's in as well as the overall market. For example, if you're looking to trade a marijuana stocks a Cro N, it is extremely helpful to understand the overall price direction of the marijuana industry. Our investors put in more money or less money into marijuana stocks.

While your individual stock may be an outlier, its performance can easily be boosted up or dragged down by the overall sector and moreover the overall direction of the market. So by the end of this video, my goals that you'll have a concrete way to understand price direction: Identify it and use it to immediately increase your odds of success in any given position. And in return for this all I ask of you is that you hit that beautiful and ravishing like button. And also if you c value, don't forget to subscribe for more short, sweet and simplified videos on how to fake the stock market direction describes or the overall price action is trending with.

AMD We see the overall direction regardless of fluctuations has been up, so we know that this is a position that is trending upwards. That means if we were taking advantage of a position that is perhaps under valued or a momentum play, everything may line up with that set up. but if the stock is trending down overall long term, then that could pull against us and lower our odds of success in that position. Now with this in mind, it's extremely helpful, especially for new traders to focus on stocks that not only have a history of undervaluing themselves and recovering, but also have an overall upward direction.

This is because thoughts that have a consistent up trending direction will be much more likely to continue up trending overall because they have that consistent upward trending pattern, and this means that they're going to be a lot more forgiving and offer a lot more margin for error if you miss the correct entry and exit point. Now at the same time, even if you have the best set up intraday or whatever period it is that you're trading in. It makes sense to value stocks that have a consistent up trading direction more than stocks that do not because the probability of success is in your favor. With those thoughts, trading is a probability game, and if you don't have the probabilities of success in your favor, then you're going to lose.

You may not lose on the first trade, you may not lose on the second trade, but overall in the hundred trades you're going to lose. And if you're not just trading for giggles, then you're probably going to what to make sure that in the long run, you're going to be able to be consistently profitable. For example, Tesla has the comeback pattern where we see many opportunities to both buy and sell. However, we do see that the overall direction of the stock is biased slightly downwards.

That means that regardless of what position we are getting in at, the probability is in the favor of the stock going down overall. So, while we may have the probability of the stock going up in the short term after it is oversold, it's likely that next time it reaches overbought, it will have a lower value than the previous time it was overbought, and you could see this depicted in the chart. That means that buying in at oversold and holding past overbought will result in a loss of profit if the consistent down trading pattern occurs. Now, that doesn't mean we shouldn't take advantage of this position, but it does mean that we need to at least acknowledge it.

There is something pulling against us now like I mentioned earlier. aside from the actual direction of that individual stock, you also want to check the overall sector. So what I mean by this is you're going to want to pull up the index one for that sub-niche Now, what this means is checking the overall direction of indexes that the stock tracks within the sector that you are trading. For example, if you're trading marijuana stocks a CRO and we are going to want to see how marijuana stocks as a whole not just that individual stock, but marijuana stocks as a whole at performing because that impacts how that individual stock is going to perform.

Obviously, there are outliers stocks within each sector and within the market. There are outliers in terms of sectors, but we're talking about how the overall trend of the sub-niche affects an individual stock. So with that in mind, we're going to find the direction of the sub niche that this stock is in. MJ is an index that holds most of the major marijuana stocks, so he can give us an idea of the overall direction of the market that Co Cro N is in.

So the overall market here is trending up on the year, so that serves as an indication that marijuana stocks are doing well and have an upward direction. And that means if you were to buy in on Kron that would be one factor that's pushing in our favor if they were on average doing poorly. That means that investors are trending towards being less willing to want to buy marijuana stocks if everyone was selling out. That means that there is something pulling Kron down that doesn't have anything to do with the stock itself, but rather the sector that it's in.

and if everyone is buying into the sector, that makes that position more equitable for us. Now, if you're interested in Biotech, you're going to check out the biotech sector. Now one of the indexes for Biotech is NBI. We could see that the biotech industry overall is trending up on the ear, at least the biotech industry exposed to on the NASDAQ because this is the Nasdaq cracker, but it is in a bit of a slump at the moment.

This means that any given biotech company is going to have that slump factor pushing against it, and it is something that we need to acknowledge if we're going to be investing or trading in a specific stock within that sector. and the reason we need to do that is because the downward direction of that sector could contribute to a downward direction of the stock that we're trading and could contribute to mess up what would otherwise be a beautiful position in a specific biotech stock. Nonetheless, the overall biotech direction is upwards on the year, so it's not really a reversal of trend yet, but it could signify an early reversal of trend. Um, if you are looking into trading semiconductor stocks for example, you could pull up S.

Lxl, which is the index for that and see that the overall trend direction is not only positive on the year, but it is also steadily increasing, while perhaps while also being overextended. You know that the overall direction is upwards with this, but that since it is overextended, we could see a bit of an imminent push back in that sector. As a whole, we can identify and say confidently that the overall direction with this is upwards, but since it is overextended on the RSI, that means it's trading a little bit higher than is to be expected based on the relative price strength. That means that we could be due for an imminent push back, but but that doesn't necessarily mean we're going to have a trend reversal.

You may have an intra week push back or an intra month push back, which which could cause a slap on the individual stocks they were trading in that sector. And one more example, if you were trading shipping or transportation stocks going to want to track the overall trend of that sector as well. We can see there is a general uptrend here, but there was also a period of pushing back during these two time spans, which you know it would have been useful to know that if we were trading stocks during that time span because we could say oh, I Don't understand why didn't my stock go down ten percent? Well, it's because the overall market went down and that was a factor pushing against you. So you needed to know that you can't just know what's happening with your individual stock.

You need to know the broader macroeconomic impacts that the overall industry performance has on your individual stock and figure out how all those combined together to push the odds in your favour. So if you're wondering how to figure out both what sector your stock is in as well as you know which index fund tracks that sector, you could simply Google what sector is blank stock in And then you can go ahead and Google whatever that sector is and the index fund attractive. For example, Merrill on an index fund or organic candle index fund I Don't think there's an organic candle. It makes fun, but there could be, who knows.

Now, you should avoid leveraged Etfs when you're seeing the broader trend of the market or the broader direction of the market, specifically because of the fact that they multiply the movements of the market, so it's not going to give you an actual realistic view of the trend of the market. So with this in mind, most of the stocks on this list, as well as the overall index funds that we've talked about have a very similar direction, and that is upwards on the year now. This is largely impacted by the performance of the overall market as a whole. However, individual sub niches will generally underperform or over perform the overall market, so it's even more important that we follow the sub niches and focus on those.

But the overall market as a whole has a huge impact on the sub niches, and we need to understand how the overall markets trending, to understand what's happening in the sub nations and then to understand what's happening in our individual stock. This may sound complicated, but we're simply taking a direction and using that to factor it into our trading decision. Now, you can have the best position and the best setup, but if the overall market is dragging down, if shares are being dumped across the overall market, that is a huge weight on an individual stock shoulder. and this is honestly what stumps a lot of people because on days where the market is trending down, people like I don't understand why this stock is trending down.

though. it has higher earnings. It has big news releases. the CEO just won five billion dollars.

It doesn't matter because the overall market can drag down each of the sectors as well. So there's a few different overall market directions that we refer to. The most general level of direction that I value and I refer to is the one that is composed of the S&P 500 now sp. Why I can give you a good feel of how the overall market is performing based on the 500 companies that are within that in debt, and we can see that the overall market is trading up since the start of this year.

The reason that I use this as the overall tracker is because there are very few companies that are not exposed to the S&P 500 in one way or the other, and the S&P 500 generally tracks each of the sectors and has a pretty good weighting in terms of figuring out how the overall economy is doing. You can also notice that a lot of swing plays and even intraday plays have been trending up in the same direction and the same direction of the market. And this is not a coincidence. stock tend to move somewhat similar to the overall market.

With that in mind, you need to understand that figuring out the overall trend of the market is very important to figuring out what type of positions you are going to be taking in. Hell, you need to be when taking them. You could have a market that's going up in a direction that's upwards and then a stock that is going downwards. But it's more likely overall that you're going to have a stock that's going upwards if it's exposed to the overall market.

So with that in mind, we can combine that with all of our usual risk management techniques and our usual and our usual pattern recognition and set up finding techniques to find opportunities that push the odds in our favor. If everything else in the market is taking in that overall market direction is downwards. That means that even if your stock, even if your individual stock is performing really well, it has an extra factor trending down. so we're going to need to be aware of how the overall market is performing and each sub niche.

Now in summary, direction is important because it plays a large factor in the overall performance of the stock that you were trading. You may only be holding a stock for a limited time period, but the price action in that time period is dictated by many factors. Now there are many factors. of which we don't have control over and we have no idea what is going on.

but Direction is one easy factor that we do. We can easily identify and direct ourselves to opportunities that have the direction pointing in the favor of our position. This way we can set ourselves up in the best situation each and every single trade or at least push the odds in our favor as much as possible. Anyways, if you have any questions, feel free to comment below or reach out to us on the Zipp trade a Circle Facebook group.

We also have a discord chat now which you could access by joining the Zip trade a circle Facebook group and I always pin pin an announcement with the links to the top post in the Zip Trader circle Facebook group. We also have a trading tutorials playlist which you could reach which you could access by simply going to the main page on the Zip Trader homepage and then pushing Zip Trader tutorials and I try to design it in a way that it works from the ground up. so if you're completely new, you could start with how to learn the platform and then just keep working down the list until you got everything mastered. But of course it takes effort on your part to actually learn and retain the information in these videos.

So I recommend that you practice and you practice. And you practice anyways. Have a great day folks and I'll see you in the next video.