Leader stocks are stocks that have the highest regard in the industry, the ones that have been moving for quite a while. They are stocks that many people think of in a positive way or positive fashion.
They are not always stocks that have the highest earnings in terms of dollar value, but stocks that beat their earnings on a consistent basis. Typically they are the ones that have continued to run to the upside for quite some time, and people prefer them because they’ve been consistent in their returns.
But why are they called leader stocks?
They are called leader stocks because they lead or guide the market higher and lower. They are usually the first ones to break out to new highs or new lows, and then usually the market (meaning the other companies and the other stocks) follows after that.
Why does this happen?
It all comes down to money flow. Investors try to get into key positions first, meaning stocks that break out first. Think about it this way, if you only have $10,000 and you see two or three stocks working really well, you’ll want to get into one or two of the best companies first. And then if you have some leftover money, you could diversify yourself or hedge your position.
It’s important to watch the leader stocks, even if you do not own or trade them, because it’ll give you an idea of how the market is moving, acting and behaving.
If the leaders are slowing down then probably the market is slowing down as well. You don’t have to follow a thousand stocks; you can just follow these few leading companies.
In rare times, because of weird economic news, cyclical breakouts, certain announcements or currency problems, leader stocks may not be leaders for the market, in which case you need to trade cautiously. But in general, most of the time, if you watch the leaders, how they move, act, and behave, the market eventually will follow.
#leaderstocks #watchstocks #stockleaders #tradingleaders #marketleaders
Posted at: https://tradersfly.com/blog/watching-leader-stocks/
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