What is MetaStock and XENITH?

For the uninitiated... In this brief video, I discuss what MetaStock is, and how it can help traders make better decisions.  It also touched on XENITH, the real-time data and news platform which powers MetaStock Pro.

TechniTrader Weekly Stock Discussion for MetaStock: “Adjusting Indicators for Downtrends”

MetaStock® SPRS Series - Week 164 – March 28, 2014 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

The uptrend and downtrend are not mirror images of each other, nor can you use the exact same indicators, indicator period settings, or subordinate indicators.

Many retail traders assume that if they learn the upside price action that when the trend turns down it is just the opposite price action.  That is why so many traders struggle to exit stocks before the trend tops and runs down.  In addition it is why many retail traders who try to sell short as well as options traders who buy puts, take so many losses in their trading.

If you are a position trader, you will be trading the uptrend and sideways trend.  If you are a swing or day trader you must trade the uptrend and downtrend, and adapt for the sideways trend.

Swing and day traders must be able to take advantage of both the upside and downside price action to net profits, that are close to what a position trader can achieve.  However, the position trader will generally always have far higher returns.

The sell side or downtrend is very different from the uptrend or sideways trend because there are fewer market participants.  Giant pension funds and giant mutual funds do not sell short. They may buy option puts or ultra-bear ETFs, as a hedging or mitigating strategy when the market goes down as they are longer term investors.

Smaller lot investors, most institutions, corporations, billionaires and other wealthy individuals and foreign funds do not sell short.

High Frequency Trading Firms, Professional traders, and some retail traders sell short or use options to make profits during a downtrend.

That is why the downside trend is so very different than the upside or sideways trend.  The downtrend often has much steeper angles of descent immediately causing a severe drop in price, and often gaps as HFTs trigger on news events.  The Downside also has larger rebounds as it bounces off of support. 

How fast the price will fall is dependent on many factors but the most important factor is always the number of HFTs that trigger the sell-off.

The downtrend can drop with low volume, and can at times gap down through technical support levels. This is due to how and where the retail crowd and the smaller funds set their stop losses.

A common mistake that many investors and traders make is to use a percentage stop loss.  Since everyone in these groups all use the same percentage stop losses, there are many strategies used by HFTs and other professionals that cause these percentage stops to trigger.  When this happens many retail traders get very angry, because the stock usually hits the stop loss then rebounds back up.

Many retail traders assume this is the “market maker” searching for their orders and taking out their stops.  

Instead it is the “Cluster Order Syndrome” which triggers HFTs and other algorithms, searching for orders that are clustered around a percentage.  As a stock drops, stop losses are triggered and the stock plummets.

 

The above chart shows a how a 10% stop loss triggered a huge down day.  It was driven by very high volume, which is the foot print of HFTs and sell short automated orders. These trigger on algorithms designed to locate cluster orders.

Summary

The downtrend behaves very differently than the uptrend because not all of the 9 market participants sell short.  More than half of the market participants hold stocks for the long term.  On the downtrend, algorithms dominant and many search for anomalies in order flow called “Cluster Orders.”

When retail investors, retail traders, small funds, and other groups all use the same percentage such as an 8% or the more popular 10%, it creates a huge cluster order at that price range.  Algorithms can search for these cluster orders that then cause huge sell downs, because of the combination of selling short AND stop losses firing off at the same time. The stock plummets within seconds often when the stop losses trigger all at once.

For information on Indicators for Selling Short go to: http://goo.gl/Iuolx0

Trade wisely,

Martha Stokes CMT

Chartered Market Technician

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                                                                 

©2014 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.

Testing Seasonality in MetaStock

Does Target stock go up during holiday months?

Do Wheat prices go up during the summer?

Does the price of Oil rise during the winter? 

Are these trade opportunities?

In my travels, I've met lots of traders who are interested in trading based on seasonality.  MetaStock's system tester can be easily modified to test a security to find if there are profitable seasonable patterns. 

In this post, I'll show you how to create a seasonality test easily in Metastock.

In MetaStock, from the Power Console click on System test and then New:

On the General tab you will put in a name for the System Test.  In this example I named it Seasonality - Longs.

Once we've finished up the General tab we'll want to setup some variables that we can use during the test.  So click on the Optimization tab:

We are going to setup four different variables.  Click on New and Setup the following variables:

OPT 1 Month Buy- Mimimum 1 Maximum 12 Step 1

OPT2  Day Buy- Minimum 1 Maximum 31 Step 1

OPT 3 Month Sell- Mimimum 1 Maximum 12 Step 1

OPT4  Day Sell - Minimum 1 Maximum 31 Step 1

This will allow us to setup our variables for use in our System Test--We are almost done. 

Now we want to setup our Buy order. 

Under the Buy Order Tab you will want to put the following formula:

Month()=OPT1 and DayOfMonth()= OPT2

Under the Sell Order Tab you will put the following formula :

Month()=OPT3 and DayOfMonth()= OPT4

It should look like this: 

What we are telling MetaStock to do is to test Buying on January 1st and Selling on January 2nd.  Except with this simple code, we are telling it to test every possible combination and tell us what would be the most profitable. 

With the MetaStock data you can literally test this back decades to see if there is a seasonal correlation with the instruments you are interested in. 

Now you can type in all this information by hand.  If you'd prefer you can download a copy this importer file from my DropBox folder and automatically add my seasonality test to your MetaStock program.    Here's the link:

https://www.dropbox.com/sh/d0j5g56kc42bmu0/Yq41W5yoDB

Employee Spotlight: Scott Brown

Name: Scott Brown
Time with Company: September 2000 - Present
Area of company works in: I have worked in Sales, Product Management, Business Development, Events, Director of Sale & Marketing, President, Owner
Do you trade in your spare time: I don't trade much.  I don't have too much time.
Favorite part of your job: Working with our customers, employees and partners.  MetaStock has been at this for decades and we have some great relationships that have occurred.
Favorite Quote: "We can't help everyone, but everyone can help someone."  Ronald Reagan
Favorite Color: Red
If you weren't working with MetaStock what would you want to be doing: Teaching


Scott is pictured here with his family at a local ball game.

TechniTrader Weekly Discussion for MetaStock: “Why Bottoming and Topping Formations are Changing”

MetaStock® SPRS Series - Week 163 – March 21, 2014 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

In the past few years technical analysis has undergone some significant changes.  Many traditional technical patterns are either not forming as often, not as reliable, or are simply not found on the charts.

Bottoming and Topping Formations have undergone the most substantial changes.  Some Bottoms and Tops are rarely seen, while some do not reverse the trend or only reverse it for a brief period of time, and others that were once common do not form at all.

These changes have been subtle and have been going on slowing for several years so these changes are often missed by retail traders.  Not recognizing these critical trend reversal technical patterns and how they are changing can affect trading profits.

Why the traditional bottoms and tops are no longer forming as they once did, is just as important as recognizing which of the bottoming or topping formations have been altered or lost.

The Bottoming and Topping formations are critical areas of a trend, and recognizing these patterns early on is key to successful investing and trading.  If a top has started but a trader is unaware or doesn’t recognize that topping pattern, an entry at that point could cause a huge loss.

Conversely, not recognizing bottoms as they are developing often leads to missed opportunities as stocks tend to run faster and longer out of bottoms in the current market structure.

Bottoming and Topping patterns are most sensitive to changes in the Market Participant Groups and the Market Participant Cycle.  This is because these are major pivotal points where a Shift of Sentiment™ occurs for the most important of all the 9 market participants, which is the Institutional Investor.

Since there are two primary types of Giant institutions, the Sell Side Institution and the Buy Side Institution, these huge lot investors can and do alter technical patterns.

One of the patterns that rarely forms in today’s automated stock market is the Head and Shoulders Top.  The market is dominated now by Dark Pools who use targeted price zones and specialized orders that insure their giant lots do not move price, and the High Frequency Traders who use special orders designed specifically for millisecond trading that is intended to move price rapidly with huge velocity runs. These cause the Head and Shoulders Topping formation to be disrupted before it can fully develop.

The Dark Pools often are in total control of price at bottoms.  With their precise targeted price zone, price is so tightly compacted with their huge lot orders that bottoms have altered dramatically. Inverse Head and Shoulders are extremely rare, W Bottoms are shallower and harder to identify, and Triple Bottoms have disappeared.  New formations are replacing these older style bottoms.  

Basing Bottoms, U Bottoms, Velocity Bottoms, and Quiet Accumulation Bottoms are just a few of the new bottom formations that technical traders need to learn to be able to recognize that a bottom has commenced, to enter early before the huge momentum runs that follow.

The Chart below is an example for one of the new bottoming patterns, which when identified early  offers strong profit as it completes.

The Chart below shows the completed bottom and subsequent momentum run.

Using outdated technical analysis in the electronic marketplace keeps traders from earning the high profits that most professionals enjoy.  Of all retail traders 90% of them lose money trading, while 90% of all professionals are making excellent income.  The difference is that the professionals continually keep up on the changes that are occurring in technical analysis patterns.

For more information Candlestick Patterns go to: http://goo.gl/Rv9aal

Trade wisely,

Martha Stokes CMT

Chartered Market Technician

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

©2014 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.

Keyboard Shortcuts for cycling through opened charts or symbols

Cycling through opened charts
If you like to open several charts at once, it can be a bit cumbersome to cycle through these via the “Window” menu.  Here are a couple of keyboard shortcuts you may find useful for cycling through your opened charts:

Ctrl+Tab = Next Chart
Ctrl+Shift+Tab = Previous Chart

Cycling through securities in a watchlist
You may also like to open a single chart inside of a watchlist, and then quickly cycle through all the symbols in your watchlist.  Here are a couple of keyboard shortcuts you may find useful for cycling through each symbol in a watchlist:

Alt+Right Arrow = Next Security
Alt+Left Arrow = Previous Security

TechniTrader Weekly Stock Discussion for MetaStock: “How to Exit a Trade Profitably”

MetaStock® SPRS Series - Week 162 – March 14, 2014 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

Entering and exiting stock or option trades is a lot like learning how to take off and land a small airplane.  The most dangerous times when flying a small aircraft are not once you get up to altitude but as you take off and when you go to land.  At both times even small mistakes for example, forgetting to adjust your flaps, maintaining the appropriate airspeed, ascending and descending at the correct angle, and banking properly are just part of the many things a new student pilot needs to remember to take off safely and to land safely.

Both new and veteran traders must also be keenly aware of very similar conditions when entering or exiting a stock. The entry and exit are where most losses occur for retail traders trading stocks and options. The better your entry and exit signals, the higher profits you will earn.  Taking time to learn how to properly enter and exit a stock trade is something that will reap huge rewards for many years to come.

Exiting a trade is often a place where emotions are running high, even for a savvy veteran trader of 20+years.  If profits are soaring, the euphoria that sets in can make it harder to really see the price action and what is going on. Greed may take over and the desire to get just a little more profit may end up being the decision that wipes out, all of the gains of the past few days for swing traders or minutes for day traders.

For Position Traders, entries and exits are far more forgiving and the gains are significantly higher.  Risk is lower and entries and exits do not require the precision of a swing or day trade.

So this lesson is mostly for swing traders.

What you need to remember most about exiting a swing trade is that once you are in profit you need to use trailing profit stops, based on the technical and fundamental support levels on the chart. Fundamental support always is stronger than pure technical support. The next thing you need to determine is whether the run is momentum or velocity.  This makes a huge difference in where to place the trailing profit stop.

For the chart below the run is momentum, so the trailing profit stop needs to be below the prior day’s low or at a consolidation area, because the candlesticks are constantly overlapping and the wicks and tails are rather long and frequent. What is happening with this stock is this momentum run was triggered by High Frequency Traders HFTs, and then chased by smaller funds and retail traders. Price is too steep to sustain. The angle of ascent just like an airplane, is causing the stock to lose lift and at some point just like an airplane that goes up on take-off too steeply and stalls falling from the sky faster than it climbed, so too will a stock that runs like this one has.

Many traders will feel very greedy at this point and will want to hold on hoping that the stock will run higher, but there are many details of this chart that warn that holding too long may be a high risk decision in terms of how much profit you keep as the stock falls due to profit taking.

This stock has been under profit taking mode since the black candle of last week.  It now has many little weak indecision day candles, these are not hammer candlesticks. These are the newer candlestick patterns that expose how large lots are controlling price even as the smaller funds are buying speculatively. Retail traders are in there also. Balance Of Power BOP is blasting but that is not a Dark Pool giant lot pattern.  The Giant lots are selling very carefully so they do not disturb price much.  However the stock is losing energy aka volume so this run is exhausted, and at risk of a stall as profit taking overwhelms the small lot buyers.

At this point the exit should be to simply exit the trade, but many traders will hold on rather than taking the profits with the larger lots.  Traders often try to “get out at the top” of a run rather than collecting their profits and moving on to a much lower risk trade.

Sure, this stock may push up higher but if you study the chart, you can see that many times HFTs come in and the sell off in one day is stupendous.  Since retail traders are not able to trade the millisecond, by the time they enter their sell order, and the order is processed, the stock can move down very fast.

Learning to take profits early and moving on to the next trade is a skill that all traders need to learn.

For more information on Stop Losses go to: http://goo.gl/AtXvPa

Trade wisely,

Martha Stokes CMT

Chartered Market Technician

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

©2014 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 for MetaStock: “Options Trading Opportunities Increase”

MetaStock® SPRS Series - Week 161 – March 7, 2014 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

Options Trading has suddenly become far more popular with professionals and smaller funds learning to trade options.  This means that options retail traders will find more trading volume and trading opportunities than have been around in nearly 10 years.  It is the Renaissance of options trading and what the professionals are wanting right now more than anything is Stock Chart Analysis Training for Options.

The professionals realize that the secret to successful options trading has more to do with selecting the right stock to trade than choosing what option strategy to use.  The professionals are learning technical analysis for the stocks they are considering using in their options trading.

One of the many areas the professional option trader needs to learn is how to interpret the new technical patterns that have emerged over the past few years.  These patterns are due to the massive Financial Market Structural changes that every market has undergone, including the Options Market.

Training for the new technical patterns covers the new types of sideways action.  Stocks move sideways more often nowadays than they did even a decade ago.  The type of sideways pattern is critical to identify early on as it reveals who is in control of the sideways pattern, the direction the stock is likely to take out of that sideways pattern, AND most importantly the volatility AND velocity once the breakout occurs.

Volatility and Velocity are not the same thing. One is a sideways pattern, the other a sudden huge move out of the sideways pattern.

Determining when the breakout is going to occur and the direction, optimizes many options trading strategies and increases profitability trading options as well as stocks. One important thing all traders both retail and professional need to learn, is how to find the right sideways patterns with strong energy building that will have big moves out of the sideways pattern.

The Chart below shows a huge gap after a lengthy sideways pattern.

The sideways pattern also contains an island gap.  If you study the chart during the last 2 months, you can see that the sideways pattern became very consistent in its pattern, just moving within the range of the prior sideways pattern before the island gap.  Often the price barely moved. See the very precise tight consolidation of the 7 days prior to the huge gap up.  These price patterns reveal a steady controlled bracketed order that is totally controlling price for 7 days. This is one of several Dark Pool or Twilight Pool footprints.  Being able to see this pattern along with confirmation of the large lot indicators tells this is an ideal set up for a velocity or momentum move to the upside.

Quiet accumulation by large lot investors is obvious in the chart and the controlled price tells the technical analyst that these are very savvy investors, who are using professional orders that bracket and control price. Dark Pools use these orders. When you can trade with the giant lot investors from the Dark Pools and you can enter with them prior to High Frequency Traders gapping price, profits are easier and more consistent.

For more information on Options Trading go to:  http://goo.gl/oop8Ms

Trade wisely,

Martha Stokes CMT

Chartered Market Technician

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

©2014 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.