This leads me to another factor you should know when trading and that is whether the stock or market is a leader or a laggard. Within every sector there are the stocks that make the sector move first and there are others that move once the sector becomes active. Some stocks move in sympathy with other stocks, like if one bank has great earnings and rallies, the other banks will follow as well. It's good to know these things and which stocks do what as it will help you find opportunities to trade.
This isn't just true within sectors but in the market as a whole. There are some stocks that can move the market by themselves. Well, not by themselves, but so many other firms react with these stocks that it moves the market, and the one stock was the catalyst that made it happen. These are usually the big name stocks with huge volume. If a company like Bear Stearns has a bad earnings report every other bank may drop, as well as many other firms that depend on the banks, which can create a snowball effect and start an avalanche. I'm not telling you not to trade these stocks but be aware that sometimes the big safe stocks can be riskier to trade than the stocks that are laggards.
I used to trade at a firm that never liked it when people traded the leaders. They thought it was too difficult to compete with all the big players in those big stocks. Instead they preferred to find small and mid cap stocks with volume of 100,000 to 500,000 shares a day that would follow the moves. They had less competition and more time to react and felt they could trade better, and this is how they taught new traders. I never liked doing it, which is why I left, but it worked for them.
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