Monday, May 20, 2013

How to Use Relational Analysis

MetaStock SPRS Series - Week 119 - TechniTrader® Stock Discussion for MetaStock Users - How to Use Relational Analysis - May 20, 2013
By: Martha Stokes C.M.T.

Take your stock pick selection to the professional level.

The professional traders process are substantially different from how retail traders approach the market. One area is how they choose what stocks to trade.

Some retail traders use strictly technical analysis, looking for a divergence, convergence, crossover, overbought, or oversold indicator pattern. Some retail traders prefer to use Gann lines, others use Elliot Wave, and some use candlestick patterns.

But what retail traders do not realize is that, this is a narrow focus technical analysis strategy. Consequently they miss many aspects of the analysis that hamper their profitability, and create chronic losses.

"Relational Analysis™" is what professional traders use which drives their profits and reduces their risk of whipsaw trades and losses. "Relational Analysis™" encompasses a simple methodology of analyzing the stock chart in a way that identifies relational values that expose who is in control of price, how that market participant groups is trading, and what that means for near term price action.

Instead of focusing on just one or two indicators or one candlestick pattern, the "Relational Analysis™" quickly accesses what has been going on recently, what aspects of the market data are revealing strength or weakness within the pattern, and how this has affected price. This provides invaluable information that tells the retail trader how price is likely to behave and move.

The chart GPS below is an example.

Chart 1

Using "Relational Analysis™" the comparison and relationship between candlestick patterns over time, volume bars average, and TechniTrader® Quiet Accumulation TTQA the large lot versus small lot indicator written by TechniTrader® Staff for MetaStock Charting Software, quickly expose several things.

First there was a shift of sentiment in TTQA in the summertime, along with a bottoming pattern, and quiet volume. This is all indicative of Dark Pool activity as they prefer to buy in early, often during August and then ride the momentum action of the fall or winter.

The Gap on high volume is High Frequency Trading HFT action, after that group discovers Dark Pools have been buying this stock.

However even after the HFT action the Dark Pools are back in again, buying in quietly unnoticed. Then their buying subsides and suddenly HFTs trigger on a news event. This is the huge red volume in December.

Now, relational analysts know that HFTs one day patterns create a surge of VWAP small funds orders which chase the HFTs. So the high TTQA is not giant Dark Pools but smaller funds selling into the buy zone of the giant Dark Pools. You can see the newest type of bottoming formation on GPS, the basing pattern that halts the downward action immediately after the HFT spike of red volume.

Basing patterns on the short term are well known to relational analysts who recognize this as another Dark Pool buy zone. Then the stock price action settles into their price range and TTQA shifts again to a buying quiet accumulation mode. As the Stock starts to move up out of the Dark Pool buy zone, the quiet accumulation slowly ceases.

What Relational Analysis™ provides is a deeper understanding of what is actually going on with a stock rather, than the superficial perspective that most retail traders have been taught.

By incorporating "Relational Analysis™" to expand your technical analysis skills to the professional level, you will begin to see the results professionals take for granted.

Trade wisely, 

Martha Stokes, C.M.T.
For more information email:
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
MetaStock Partner
©2013 Decisions Unlimited, Inc.

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