The definition of an uptrend is: a price pattern making a series ofhigher lows and higher highs.

As I said in the last chapter, trading stocks in strong uptrends is where you and I will spend most of our time. Swing traders target the two-to-five day breakouts in a stock that is beginning a hardy uptrend. Position traders scan for stocks breaking out of a Stage One base, then buy and hold for the duration of the uptrend, possibly four to six weeks.

Stocks break out of bases and into uptrends for several reasons: Institutional buyers (such as managers of mutual funds and managed accounts) suddenly show interest, the related industry or sector gains favor, or the stock comes out with positive news and good earnings. The added buying pressure (greed plus demand) shoots the stock out of its base and above previously formed resistance.

The below figure shows how a stock breaking out of a base and into an uptrend will appear.

If you talk to a tennis pro about a tennis racquet, he or she will show you the „sweet spot“ on the racquet face. You'll find that spot in the center of the strings. Hit the ball perfectly on the sweet spot, and you'll deliver your shot with delicious power and accuracy.

As a swing trader, your goal is to capture multi-point „sweet spots“ in each upswing in a strong uptrend. The sweet spot translates into the. „middle“ of the upswing.

„Hey,“ you retort. „What do you mean, ‚middle‘? I want more than the middle points. I'm gonna buy at the bottom and sell at the top!“

Let's be realistic. The wealthiest traders aim for the middle, and so will you. When you buy, you want to make sure' the breakout is a healthy one, so you wait for confirmation. When you take profits, you sell when you can, not when you have to. Will you sometimes leave a point or more on the table? Sure. Do you care? Nope! You planned your trade and traded your plan, and that's the road to success!

The below figure gives you a quick glance at the swing trading and position trading strategies possible in an uptrend.

I've already anticipated your next question: „How can you make the most money, by swing trading or position trading?“ Answer: In a muscular bull market that propels market leaders skyward, a talented swing trader can jump onto stocks rocketing in euphoric uptrends and pluck fat profits. In a market rising in a relaxed uptrend, where breakouts take more savvy and skill to capture (and the discipline to jump out when they fail), a position trader who quietly plods through the higher highs and higher lows, pulling a trailing stop-loss behind, may actually come out ahead.

The best of both worlds: Take a position in a stock when it breaks out, then, depending on market conditions, swing trade a portion of the position, and keep the remainder in position-trade mode.