TechniTrader Weekly Stock Discussion: “5 Tips for Higher Swing Trading Profits”

MetaStock® SPRS Series - Week 142 – October 25, 2013 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

Swing Trading is a very popular short term trading style used by retail traders and professional traders.

It is far superior to Day Trading in every way, and here are 5 reasons why:

1. Lower costs to set up and maintain your trading system and platform.
2. Lower capital and experience requirements from online brokers.
3. Less time needed to make significantly higher profits per month.
4. Flexible work hours and less effort to manage open held stocks.
5. Less stress and much more fun to do.

Swing trading depends primarily on the analysis of the stock chart, and recognizing specific candlestick patterns that indicate a momentum or velocity price action is about to start.   

In order to be highly successful at Swing Trading, you need to find the right price candlestick patterns on your stock charts that will be ideal Swing Trades.  Just picking any old stock, a recommended stock, or a stock in the news is NOT going to be the best method for choosing a Swing Trade stock pick.

Here are 5 Tips on how to read a stock chart and decide if it is suitable for Swing Trading:

1. REPETIVE CANDLESTICK PATTERNS that yield consistent Swing Trading runs that are profitable.  When you find a chart with candlestick patterns that repeat regularly, this gives you a means of anticipating AND recognizing a similar setup for the next Entry before the Swing Trade run begins.
2. PRICE LEVELS are most important for Swing Traders.  Sure, any price level can have a momentum or velocity run, but for Swing Trading it is also about being in with the professional Swing Traders that track the Dark Pool giant lot funds managers.  By trading with the pros you have a significantly better profitability ratio and far more consistent runs. Lower priced stocks are generally the realm of smaller lot uninformed traders.  Extremely high priced stocks are the realm of retail day traders or options traders.
3. FOLLOW THE GIANT FUNDS MONEY PLACEMENT. The giant Buy Side funds control trillions of dollars of mutual fund and pension fund investors.  The stocks they are buying are strong candidates for Swing Trading because these stocks have companies with improving fundamentals or expanding growth potential, or both.  By tracking the giant funds via TechniTrader Quiet Accumulation TTQA Indicator as example, retail traders know that this company has stronger fundamentals and is poised for growth.  A company that is growing will  have periodic momentum and velocity moves due to surprise Earnings, sudden great news, and High Frequency Trader HFT triggered buying activity.
4. KNOW THE DIFFERENCE between a Momentum run and a Velocity run.  The Velocity run is faster moving, gaining more volume energy and buying speculation. This type of run requires a completely different trailing Profit Stop position to keep you in the stock while protecting profits, from the inevitable profit taking the professional traders will begin at some point. A Momentum run will last much longer but has rests frequently. The Stop Loss for a Momentum run needs to allow for the natural pausing, resting, and small indecisive price action days to keep you in the trade until the Momentum energy is exhausting.
5. ENTRIES AND EXITS for Swing Trading must be precise, deliberate, and well planned.  Just jumping in because a stock has started to run is the best way to lose money on a Swing Trade. Using a pre calculated Entry that buys into strength instead of the traditional Limit Order so many retail traders use, is crucial to successful Swing Trading. Never buy into weakness using a Limit Order. Using a Limit Order is one of the most common reasons Swing Traders do not have consistent profitability.

When you combine professional style Repetitive Patterns, Price Levels, Indicators, Stop Loss placement, Entries and Exits your Swing Trading will go to a whole new level of profitability.  It will be easier, more reliable and a lot of fun to do.

For more information here is a link for Candlestick Patterns

Trade wisely,

Martha Stokes CMT

Member of Market Technicians Association

Master Rated Technical Analyst for Decisions Unlimited, Inc.

Instructor and Developer of TechniTrader Stock Market Courses

For additional training visit http://technitrader.com

This Stock Discussion and Training Lesson is sponsored by TechniTrader.com

MetaStock® Partner

©2013 Decisions Unlimited, Inc.  All Rights Reserved.

TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader and its instructors or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues.  At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.

TechniTrader Weekly Stock Discussion: “Trading with Exchange Traded Funds ETFs”

MetaStock® SPRS Series - Week 141 – October 18, 2013 - MetaStock Spatial Pattern Recognition Skills Series  written by Martha Stokes CMT

Nowadays, there are far more opportunities for making extra monthly trading in the stock market than ever before.  One hugely popular area is the Exchange Traded Funds ETFs.  This is a relatively new trading instrument that is a derivative. Just picking any ETF and trying to trade it is a great way to lose money.

There are many different kinds of Exchange Traded Derivatives:

ETFs are based upon an underlying group of stocks or group of funds that are held in a trust account long term.

ETNs are based on different kinds of bonds or debt securities that are held in a trust account.

ETCs can be either based on commodities futures contracts or currency contracts.

Then there are the leveraged ETFs which are designed for very specific institutional needs that most retail traders do not understand. Any leveraged ETF is prone to sudden price shifts as these must be rebalanced from time to time to maintain the leverage aspect.

The most popular and most commonly traded ETFs are also the oldest which are the SPY, DIA, and QQQ. These are based on a specific type of weighting formulation, and are often used for longer term investing. However there are also many different types of weighting used in different big index ETFs. Understanding which weighting is right for your trading or investing can make a substantial difference on your Return On Investment ROI.

As an example SPY is the oldest EFT and is Market Weighted. RSP is an Equal Weighted ETF and they provide significantly different ROI when holding in a longer term position, see the charts provided below. Although the charts are very similar, the net profits are significantly different over time.  Even if you are a short term trader, this can affect your profitability.

Learning to trade ETFs requires an understanding of the purpose, the type, and the issuer intent. It also requires learning whether it is suited for long term or short term trading, and whether it is leveraged or not.  In addition it is important to determine which market participants are using the ETF, their long term and short goals, and speculation.

When an investor or trader takes the time to understand the controlling factors behind their action and how these derivatives are developed, created, and their purpose, it makes it far easier to choose the proper ones for your personal goals and trading parameters. Trading is not just about finding a stock or ETF to trade, it is also about understanding the market structure and market participant groups who are actively trading in that stock or ETF.

By going beyond mere indicator or candlestick patterns, the retail investor or trader can dramatically improve their ROI and profitability regardless of their personal goals and trading preferences.  Always know what you are buying beyond mere chart patterns, otherwise you are trading blindly with a lack of knowledge that can cause substantial losses.

For more information regarding investing and trading ETFs, sign in to consider taking the TechniTrader Online Course titled “(ETF) Exchange Traded Funds & Index Trading” at  http://goo.gl/kDy9lc

Trade wisely,

Martha Stokes CMT

http://technitrader.com

Member of Market Technicians Association
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader Stock Market Courses

©copyright 2013 Decisions Unlimited, Inc.  All Rights Reserved.

TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor, it is strictly an educational service.

TechniTrader Weekly Stock Discussion: “FDO Family Dollar Store Inc.”

The huge advantages retail investors and traders have today that were unavailable a decade ago, are the new indicators that help track the Dark Pools and giant institutions who control over 80% of the market activity. 

Their investments in large caps ranges from 40-80%, and their investments in small caps can be as high as 99%.

FDO currently has a 96.80% institutional ownership, which means that the mutual funds, pension funds, and sell side institutions own the majority of the outstanding shares of this stock. Their investing can be long term or it can be short term. Sell Side Institutions often buy stocks to hold in trusts for derivative instruments they create and issue such as ETFs.

The advantage that retail investors and traders have nowadays, IF they learn to use modern indicators rather than outdated indicators such as MACD, Stochastic, and other old-style price indicators is the ability to see the technical patterns called negative divergences. A negative divergence occurs when a leading indicator moves in opposition to the price trend.
This is an essential indicator created by TechniTrader to help students see negative divergences. This is vital information investors and traders need, because the most critical areas are tops and bottoms which can be difficult to see and consequently is where they lose money.

Price indicators do not lead price because anytime you use a moving average based indicator, the price MUST move before the indicator can react and create the line direction. That means all indicators that are based on moving averages of price lag. Even an exponential moving average which places more importance on the current price over the older price, in the time set group of prices that are used in the moving average aka 10 days, 20 days still lags price. This has been a problem for decades that great indicator writers tried to eliminate.

What has happened in recent years is a massive shift of how stocks are traded by the giant institutions. With this shift of market structure, the importance of volume indicators has escalated. Without the proper volume indicators, retail investors and traders are prone to chronic losses. This is due to the lagging qualities of price indicators.

With volume indicators, especially indicators such as TechniTrader Volume Accumulation TTVA which is exposing large lot volume activity in relation to what price is doing, negative divergences are exposed early on before the stock collapses. This means that retail investors and traders can now see that the stock is at huge risk of a top or a correction, thus avoiding buying into a top.

For additional information sign in to view a free webinar titled “Explorations: Beyond the Basics" at http://goo.gl/bhE7F3
Trade wisely,
Martha Stokes CMT
http://technitrader.com
Member of Market Technicians Association
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader Stock Market Courses

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©copyright 2013 Decisions Unlimited, Inc. All Rights Reserved.
TechniTrader is the registered trademark of Decisions Unlimited, Inc.
Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor, it is strictly an educational service.

TechniTrader Weekly Stock Discussion: Linear Regression Lines

In prior discussions TechniTrader Quiet Accumulation TTQA, TechniTrader Volume Accumulation TTVA, and TechniTrader Flow of Funds TTFF have been featured. Today the discussion is on Linear Regression Lines, a terrific Indicator that is seldom used. 

Next week the discussion will be on the best use of Relative Strength Index, Wilder's RSI.

Looking at the Price chart window above for MCD, there are 2 blue Linear Regression Lines. As with all indicators that are single line indicators, combining two primaries or a subordinate indicator applied to the primary indicator, provides a superior analysis as well as speeding up the entire indicator analysis process.

Linear Regression Lines do not average price. They are unlike Moving Averages which are a formula that adds up all of the data within a set time period and divides by the total of that day, for the simple moving average formula that creates the moving average line on the chart. The Linear Regression Lines are a straight line indicator.

Moving Averages are the oldest of all of the stock indicators, and were used and are still used primarily to confirm that the trend is still intact, and were never designed to be leading indicators by themselves. Moving Averages are subordinate indicators, whether they are used with primary indicators or with candlesticks. Remember that candlesticks are an indicator for price.

Linear Regression Lines are also a subordinate indicator but instead of smoothing price action, the Linear Regression Lines are a stark straight line from the current price back X number of days or periods of time, depending on what time frame you are using on your chart.

The example above is for a daily chart. The Linear Regression Lines are set for an analysis of the intermediate term trend and the short term trend. This provides invaluable information for proper analysis of the trend.

In the chart above, we can clearly and easily see that the intermediate term trend Linear Regression Line which is the longer of the two, is far beyond the peak of price on the chart in March when the downtrend started. What this warns is that this is heading toward a longer term trend for the downside action. The intermediate term downtrend has been underway for 7 months, which is getting close to the maximum normal length of an intermediate term correction of about 9 months average. If this were more than 12 months, then this would be a long term trend.

The short term trend Linear Regression Line has tipped up with this recent bounce run. This means that the short term trend is patterning out the intermediate term downtrend extreme angles of descent, which slows the downtrend and lessons the speculative price impact on the trend. This regular interval of the short term trend moving in a contrarian action against the intermediate term trend, is what is sustaining the intermediate term downtrend.
Without these occasional short term moves up, the intermediate term downtrend would be too steep to sustain and a V bottom would develop quickly. The short term trend is helping the downtrend continue. When the intermediate term Linear Regression Line starts to flatten and angle upward, then a bottom formation will have started. Linear Regression Lines are essential Indicators for Position and Swing Trading.

For more information about stock indicators sign in to view our free video titled “Online Trading Tips” at
http://goo.gl/I9Nvxb
Trade wisely,
Martha Stokes CMT
Member of Market Technicians Association
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses

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For additional training visit http://technitrader.com
This Stock Discussion and Training Lesson is sponsored by TechniTrader.com
MetaStock® Partner
©2013 Decisions Unlimited, Inc. dba TechniTrader® All Rights Reserved.
Technitrader is the registered trademark of Decisions Unlimited, Inc.
Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader and its instructors or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service

TechniTrader® Weekly Stock Discussion: “Platform Compressions Are Ideal Entries”

Platform compressions are ideal entries for swing and momentum traders, and identifying these compression patterns early is most important.

We are looking at SWIR today to study a relational technical analysis pattern.  This stock was under Dark Pool quiet accumulation which tends to form platforms. Dark Pools create this sideways pattern with controlled bracketed orders that buy incrementally over time.  The goal of the Dark Pools is not to disturb price. As they conclude their buying for that period, HFTs find out and can push price up with momentum as occurred in January on this chart. Prior to that move up, the candlesticks compressed. These platform compressions are ideal entries for swing and momentum traders.

A compression is a tight consolidation rather than a wider platform. It doesn’t matter where the compression forms, at the low or high of the platform range, it often precedes a decisive breakout and run or gap. Then the stock resumes its sideways pattern as Dark Pools start buying at the next level.  

Platform compressions are ideal entries that form at or near the end of the platform, and are often missed by retail traders.  

Bollinger Bands can be used to assist in the identification of the compression. These expanding and contracting bands provide excellent analysis for sideways patterns. Entries must be made prior to the breakout due to the rising energy that develops as price compresses.  

One aspect of Bollinger Bands to remember is that the center line for a strong compression will be equal distance from the outer bands.  In a strong compression, the center line on Bollinger Bands will move right through the center of the candlesticks.  If the center line is below or above, then the pattern is not as strong or indicative.

Learning to identify compressions in platforms is a Spatial Pattern Recognition Skill that helps swing and momentum traders trade platform market conditions. Sideways markets occur 50-60% of the time and these are the market conditions that tend to have retail traders whipsawed out of trades constantly.

Platform compressions are ideal entries so instead of attempting to trade the small runs in a platform, wait for the compression pattern, and enter before the stock runs or gaps with momentum.

Using different techniques and strategies during a sideways market can help swing and momentum traders find more stocks to trade with much higher point gain potential.

For information regarding trading styles sign in to access “Choosing a Trading Style” here: http://goo.gl/ki1UO4

Trade wisely,

Martha Stokes CMT

Member of Market Technicians Association

Master Rated Technical Analyst for Decisions Unlimited, Inc.

Instructor and Developer of TechniTrader® Stock Market Courses

For additional training visit http://technitrader.com

This Stock Discussion and Training Lesson is sponsored by TechniTrader.com

MetaStock® Partner

©2013 Decisions Unlimited, Inc. dba TechniTrader® All Rights Reserved.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader® and its instructors or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues.  At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader® and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader® is not a broker or an investment advisor it is strictly an educational service