Official MetaStock Blog

Thursday, August 29, 2013

Are you Prepared?

Martha Stokes CMT teaches you how to prepare for the most active trading season...

MetaStock® SPRS Series - Week 134 – August 30, 2013 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT

September through February are the busiest and most active trading months of the year, with heaviest trading volumes and higher energy. Even though August appears to be quiet on the surface, there is a huge amount of activity just below the slumping Index action. If retail traders only watch the indexes they miss all of the underlying activity in August, which gives vital information about what to expect for trading in September and forward.

Explorations that are customized to follow the indexes, do not track what is crucial to successful trading. Without this information retail traders are utterly reliant upon less than 10% of the listed stocks, and NONE of the Exchange Traded Derivatives which at this time is 1,395 ETFs. The NASDAQ currently has 2,663 listings, the NYSE has 4,632, AMEX 438, and OTCBB 1,076.

The S&P500, Dow, and NASDAQ only represent 630 companies.

The remaining 9,574 trading instruments on the exchanges represent a far larger body of stocks that do not always follow the lead of the indexes. In fact of you were to study this huge group of stocks and ETFs, you would discover that often times these lead the indexes. This is because they expose the direction and sentiment of the giant funds. They reveal the Sell Side institutions and Buy Side institutions and their interest or lack of interest, their accumulation or their distribution in and out of sectors and industries, and whether they are going to move into large cap or are vested in smaller cap stocks.

All of this information is available IF you use Explorations that are defined to track the institutions both Sell Side and Buy Side, and where they are placing money and where they are rotating. This activity is not seen on the indexes. It can only be studied by using Explorations designed to expose what is going on with the vast majority of stocks and ETFs that are not listed on indexes.

If you are a TechniTrader® Student using our Advanced Tools specifically designed for MetaStock, you have all the Explorations you need to study the underlying market beneath the major indexes in relation to how the indexes are performing. In addition you also have specific Explorations for your trading styles such as Swing or Position trading, price levels, strategies, and quiet accumulation tracking bottoming or topping action.

The goal of trading should be to streamline your trading process so that you spend more time trading and less time trying to find stocks to trade. This means understanding the market conditions so that you can select the right stocks for the current trading conditions, the correct strategies to use based on which market participants are in control of price at that time, and the overall sentiment of the underlying securities because these lead the market action most of the time.

If you are still using the 3 major indexes as your guide to trading you are missing a huge chunk of critical information. This can be one of the reasons for chronic losses, whipsaw trades, and disappointing net profits. Upgrade your trading process by incorporating not only the 3 major indexes, but also the analysis of the bulk of the market which are the underlying securities not listed on the 3 big indexes.

For more information regarding Explorations that are defined to track the institutions both Sell Side and Buy Side, sign in to watch a free TechniTrader - MetaStock Webinar "Explorations: Beyond the Basics" CLICK HERE or 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

For additional training visit http://technitrader.com

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

MetaStock® Partner

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

Friday, August 23, 2013

How to Follow the Pros of the Market...

Retail Traders need better, more intuitive chart analysis tools...

MetaStock® SPRS Series - Week 133 - August 23, 2013 - MetaStock Spatial Pattern Recognition Skills Series written by Martha Stokes CMT:

How To Follow the Pros of the Market

With High Frequency Trading Companies, Dark Pool Automated Transaction Systems, and more and more Pro traders actively trading stocks, Retail Traders need better, more intuitive chart analysis tools to help them find stocks that are poised to move PRIOR to the big moves up or down.

Often times, the HFTs’ attempt to sell down further is thwarted by Dark Pools buying in incrementally without exposing their pre-trade interest. This can cause retail traders, who chase after the HFTs, to take losses.

Rather than chasing HFTs, retail traders need to learn to spot the Dark Pool activity that forms in stronger bottoms.

This is made far simpler with TechniTrader Quiet Accumulation, TTQA, which is a quiet accumulation indicator. The chart above shows a stock stuck in a range-bound bottoming formation that failed to move up after several attempts. HFTs tried to move it down, but it bounced right back up due to Dark Pool buyers. Volume bars hold above the average line consistently and the TTQA indicator shows the footprint of the Dark Pools as the price moves up just below the prior resistance level.

As energy builds with Professional Trader activity and Dark Pool activity, the stock moves up to form a tight consolidation at the prior resistance level. Tight price action is indicative of a very controlled entry used primarily by Dark Pools and Pro Traders. This is not HFT action but the giant funds buying quietly.

TTQA confirms the momentum energy and price action continuation, resting again, and then moving up further. The steady increase of TTQA is even more reliable than the volume bars to allow you to hold as the stock moves up with momentum energy.

Momentum energy is reflected first in the dominant buying power of the Dark Pools. Although their pre- trade interest is dark, once their orders are executed, these orders are displayed, often delayed but displayed to the lit market. Learning to see their buy-in areas using candlestick pattern analysis with modern leading indicators, such as TTQA, will help the retail trader get into a momentum run earlier for higher profits and easier-to-manage trades.

As we approach the fall and winter months when trading activity increases, these momentum runs will also increase.

Many retail traders continue to use outdated chart analysis and indicator analysis. This puts these traders at higher risk of whipsaws and missing out on the faster moving stocks.

Watch a demonstration in Metastock of how to catch HFT activity HERE.

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

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. Students/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.

Friday, August 9, 2013

The Power of Key Pivot Points

What really drives the market in either direction...

MetaStock U - Week 3 - The Naked Traders - The Power of Key Pivot Points - August 9, 2013
By: Chief Trader Bruce E. Dinger

New traders are always wondering what really drives the market in either direction…the answer is simply supply and demand – price action – or what many professionals refer to as KPPs – Key Pivot Points.

The KPPs of a stock are very powerful psychological buying and selling areas that enable a trader to focus on their entries, exits, and most importantly the ability to manage their risk. These KPPs of a stock attract buyers and sellers into a trade and when combined with the dominant trend of the stock can produce amazing results for a trader.

Some traders primarily use the KPPs of a stock to manage their trades from A to Z. This includes outlining a clear entry and clean exit. The KPPs also guide a trader to help determine a stock’s ATR (average trading range) and how long it typically takes for a stock to make its move. Learning how to identify KPPs and combining them with “price action” increases your chances for taking your trading career to new levels.

We have found over the years of trading that the best indication of a stock’s movement is price action and how the price reacts with the KPPs. This is because price action will reflect the emotions of the market place. When a trader combines price action with the KPPs of a stock, this can be a very powerful tool for gauging the stock’s next move.

KPPs are also referred to as support and resistance areas. It is one of the most critical things to learn to identify if a trader is looking to trade for a living. It provides a thesis of buying or shorting (trading it to the downside) a stock. Learning how to identify KPPs will enhance a trader’s results because of (3) three major factors involved:

It requires the trader to identify a clear entry point
It requires the trader to identify a clear exit point
It helps the trader identify quality trades with solid reward to risk ratios

So how do you identify the KPPs of a stock?

In most cases, this cannot be done with just a single time frame, but rather done most effectively by using multiple time frame analysis. A trader will find a stock has primary and secondary KPPs, and it is not always easy for the novice trader to distinguish between the primary and secondary KPPs. However, if the trader incorporates both long and short-term charts, it will be easier to recognize the cluster areas of previous buying and selling of a stock.

These clusters will become easier to recognize as the trader spends more time examining various charts and studying multiple time frames. As a trader finds these clusters and compares them to other time frames that the stock huddles around, these should be marked and noted on the chart as either a primary (strong area) or secondary (moderately strong) KPP. The more times that the stock revisits a specific area, the stronger the KPP.

Keep in mind that the market leaves tracks from investors and the market has a long memory. The KPPs will help a trader identify where the main action takes place - where traders view and interpret good buy or sell zones. It is recognizing these areas that will help a trader identify their entry points, exit points, and effectively manage their risk.

There are many moving parts to the market and much for a trader to watch, but we have found as traders and educators of the stock and options market that learning how to effectively identify a stock’s Key Pivot Point is critical to continued success in the market place; regardless of whether your goal is to invest and build long-term wealth or day trade the market to create cash flow.

About Bruce E. Dinger

Chief Trader Bruce E. Dinger, CEO and Chief Trader of TNT Trading the Stock Market, formed the The Naked Traders with the concept of teaching other independent traders how to "strip themselves of all emotion" when they trade or invest in the stock market.

Mr. Dinger has spoken on some of the largest stages around the globe, including CNBC, BusinessWeek, SuccessMagazine, The Women's Financial Conference, Rich Dad's, On-Line Trading Academy, Success Resources, and many others. He has one of the best reputations in the financial markets for helping students achieve their goal of becoming an independent trader or investor. Mr. Dinger can be reached at info@TheNakedTraders.com.

Trading a Momentum Market Using Swing Trading Techniques

MetaStock SPRS Series - Week 131 - TechniTrader® Stock Discussion for MetaStock Users - Trading a Momentum Market Using Swing Trading Techniques - August 9, 2013
By: Martha Stokes C.M.T.

Summertime momentum markets are rare. It takes two things occurring simultaneously to create a momentum market:

A rush of new monies into stocks.
Advances in new technologies.

We have both right now. The Bond Markets are a Trillion-dollar market but in one month alone, there was a dumping of bond funds in historical proportions. This amounted to nearly 80 billion dollars being pulled from bonds in one month. This is a huge red flag for current bond holders and bond fund managers that a major shift of sentiment has occurred.

The money has to be place somewhere in one of the several Financial Markets. It is moving from Money Market Accounts directly into stocks, creating a momentum energy market not seen in many years.

To swing trade a momentum market, you need to understand the dynamics of not only swing trading but also how momentum action behaves, how it is different from a velocity price action, and how it is NOT volatility as many will claim but ENERGY that continues in one direction with building volumes and rising prices followed intermittently by resting day patterns rather than retracements.

Momentum price action is unique and learning to read these charts requires far more understanding of candlestick patterns than is taught in books written a decade ago. Within the past 3-5 years, the way price reacts, how candles and where candles form, for how long, and when price will suddenly move again has changed dramatically. Just learning the candlestick patterns in a book or from an article online is not sufficient for highly successful swing trading in momentum markets.

Below, the TTQA indicator exposed Dark Pools buying. By itself, price doesn’t look like anything during some heavy Dark Pool buying. But the energy that is generated when Dark Pools buy incrementally without moving price causes big runs to follow, such as this chart has.

On the chart below, the failed sell down that started with the engulfing black is best seen in the indicators, which accurately tell you that the sell down attempt has failed and more upside is coming. This allows you to enter the stock prior to the gap.

In the chart below, shifts of sentiment, increasing volume patterns, building underlying energy in TTQA, all are vital cues that tell you the resistance level is going to be blasted right though, that this time resistance will not hold back this stock moving out of a long term bottom.

The crucial analysis you need in order to find stocks BEFORE they move suddenly, running or gapping up quickly, is relational analysis: the interpretation of the relationships between price, volume, lot size, and who is trading the stock at that time.

When you combine relational analysis, the new candlestick patterns that have just started to form in the past few years, and Hybrid Indicators like TTQA, your ability to choose fast-moving stocks and have strong momentum swing trades will be faster, easier, and far more reliable.

Did you miss our most recent webinar for MetaStock users?

Watch it here: Accelerate Your Indicator Analysis

Trade wisely,

Martha Stokes, C.M.T.

For more information email: info@technitrader.com
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner

©2013 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.

Tuesday, July 30, 2013

HFT Price and Volume Patterns

MetaStock SPRS Series - Week 130 - TechniTrader® Stock Discussion for MetaStock Users - HFT Price and Volume Patterns - August 2, 2013
By: Martha Stokes C.M.T.

We have been studying the High Frequency Trading price and volume patterns in the last few discussions. High Frequency Trading orders are triggered primarily on news during earnings season. These low latency high speed trading platforms often cause big gaps that seem to have no predictability.

However when Relational Analysis™ is applied to the Price, Volume Bars, and TechniTrader Quiet Accumulation TTQA then patterns are revealed, that are difficult or impossible to detect with just price and price indicators alone.

If you were to just use price and price based indicators all you would see is a very choppy sideways pattern that whipsaws swing and momentum traders frequently causing losses on trades. MACD is a price momentum indicator that fails dismally when charts have this new type of sideways pattern called a "Platform." The platform is a very specific type of sideways pattern that first started forming in 2005 and has become increasingly more common as more and more giant and large funds use Dark Pool ATS.

To be able to anticipate what price is going to do and when it is most likely to trigger HFT orders that run and gap hugely, it is imperative that volume and quiet accumulation indicators be used.

What volume and TTQA show is that there was quiet accumulation going on in this stock that created the Platform sideways pattern. HFTs gapped the stock up as the Dark Pool quiet accumulation ceased and smaller funds chased the HFTs. During the next platform Dark Pools returned quietly adding to their holdings. Several attempts to sell the stock down created a flurry of smaller funds dumping this stock. Notice how TTQA diverges from volume and that most of the Volume is green during the red TTQA period. This exposes Dark Pools buying once again. Subsequently the sell down fails because the giant funds are buying, while smaller lots are trying to sell short against the huge lot buy orders. The compression pattern just prior to the gap up, along with the fading TTQA angling up, and lack of sell side volume all point to HFT trigger opportunity.

The stock gaps as HFTs automated orders react to the Dark Pool buying earlier.

Being on the right side of the trade requires that you not only use price indicators but that you also use volume indicators, that not only show volume action but also large lot versus small lot activity.

These indicators are more sophisticated as they are the new TechniTrader® Hybrid Indicators™ but learning to use them will dramatically improve your trading results.

Trade wisely,

Martha Stokes, C.M.T.

Friday, July 26, 2013

The 7 Key Ingredients for Successfully Trading for a Living

MetaStock U - Week 2 - The Naked Traders - The 7 Key Ingredients for Successfully Trading for a Living - July 27, 2013
By: Chief Trader Bruce E. Dinger

Trading in the stock market can be challenging if you do not have a clear roadmap and recipe for success. The purpose of this article is to provide some key structure in selecting your investments or trades. Follow this process and your chances for finding high-probability successful trades are likely to increase.

1. Industry Group

The most common mistake that investors make is looking at an individual stock without reviewing the industry group’s performance. It is key that investors start their due diligence by examining the performance and trend of the overall industry group. Savvy investors understand the importance of a “top-down” analysis approach and know that old saying “a rising tide lifts all boats”. So if you truly want to increase your chances for success in the stock market, start with the attraction or trend of the industry group before identifying any individual stock.

Industry or sector analysis is very similar to a real estate investor purchasing a property. The real estate investor first focuses on the surrounding neighbor because they know the importance of associated properties and how they will have an impact on the valuation of their identified property. Trading and investing in the stock market is very similar. If you develop the habit of checking the surrounding “neighbor”, understand the attraction or valuation of those related properties; you will increase your chances for successful investment selection.

2. Fundamentals

The 2nd thing you need to do BEFORE you think about pulling the trigger and placing that trade is to check under the hood, what is better known as the “fundamentals”. Many investors think they need a degree in finance, but even a simple look at the company’s basic fundamentals will give you a sense for the strength and viability of their business.

Key Fundamentals

Here are some key trends to note and compare to the company’s closest competitors.

Revenue
Net Income
Profit Margin
Return on Equity

3. Trends of Interest

Critically important is to look for trends of interest. This means starting with the “footprints of the elephants” and noting if the big investors are putting their money on the line with your stock of choice. While the investment from a big money manager is no guarantee that your stock is going to do well, it does increase the probability. Another trend to watch for is “insider buying”. There are many reasons that executives of a company sell their shares, but there is usually one main reason that they buy shares of their company – they believe it is undervalued.

It is also important to note global trends for the company’s supply and demand of their products and services. Successful investors and traders understand the importance of noting trends and classifying them as “cold, warm, hot, and explosive”. Yes, analyzing global trends does take time and a commitment to serious due diligence, but the payoff can be HUGE.

Finally, under “trends of interest”, an investor should focus on the leadership of the selected company. Determine if the executive team are seen as visionaries, great business leaders, or under performers. If they have major followers, chances are great that the stock valuation has solid upside potential.

4. Analysts

Many investors dismiss analyst ratings but this is a mistake. After doing your above due diligence and your findings support a high-probability rocket ship stock, but then you notice that the consensus amongst the analysts is a “hold”…this could be the set-up for a future catalyst. How, you might ask? If everything else is equal and your findings support a good buy, and then later the analysts begin to revise their ratings from a “hold” to a “buy”, this typically serves as a catalyst to help catapult your stock’s valuation to new heights.

5. Earnings and Conference Calls

There is much that you can learn by listening to the company’s conference call. You will find out not only the company’s outlook and possible concerns, but you will also uncover what is important to the analysts. The questions being asked could signal a trend of what the analysts are seeking and provide insight to you as an investor of what is really important. Listen to how the executives handle the questions….are the questions handled with confidence? Are there other companies in that group that perhaps have a better foothold on the trend of interest to investors and analysts? Listening to the earnings call or reading the transcript is key in this process of becoming a successful investor or trader.

6. Technical Analysis

After all due diligence has been completed, one of the true barometers of the market’s interest in a stock is “Price Action”. The supply and demand of a company is ultimately reflected in the price. An investor or trader of the market must learn how to recognize KPPs (key pivot points) that reflect the emotional patterns of market participants. As you become more familiar with the price action, price patterns, support and resistance areas, and other technical aspects of chart reading, your ability to effectively manage your risk and identify low risk/high reward opportunities will increase.

Regardless of whether you are a short-term trader or long-term investor, to effectively recognize price patterns and distinguish between ‘major’ and ‘minor’ reflection points of supply and demand, it is important to use multiple time frame analysis. This means viewing a chart from not only a standard one-year time frame, but looking at all major time frames including a 20-year, 10-year, 5-year, and 3-months, and various intra-day charts.

Viewing a chart utilizing multiple time frames will ensure that you gain a better understanding of key pivot points and the major and minor waves of a chart. This helps you to make better decisions on both your entry and exits.

7. The Plan

One of your finals steps before placing the trade is to plan your entry, your exit, and the strategy you intend to utilize that will not only help increase your probability for success, but also eliminate as much of the risk as possible. Architecting a trade with the idea of reducing your exposure and providing the highest reward is the true sign of a Master Trader.

Follow the 7-steps outlined above and you should see a higher degree of success in the market and come closer to your pursuit of trading for a living.

About Bruce E. Dinger

Volume Spikes Continued

MetaStock SPRS Series - Week 129 - TechniTrader® Stock Discussion for MetaStock Users - Volume Spikes Continued - July 26, 2013
By: Martha Stokes C.M.T.

High Frequency Traders create most of the "Volume Spikes" that form on your charts nowadays. This is due to their high speed, low latency trading platforms that execute as many as 3000 trades per second. This is way beyond the scope of retail trader's minute trading platforms.

HFTs can control price for one day, and sometimes for 2 days. Their volume patterns are easy to identify on the charts and can give you a leading indication of what to expect the next day.

If you are a swing trader, learning these patterns is crucial for your success. If you do not understand whether the HFT volume is a continuation or a reversal pattern, and why it is a continuation or reversal pattern then you are most likely to find yourself on the wrong side of the trade most of the time.

Studying the chart above with colored volume to indicate an upside price day versus a downside price day, it is easy to pick out the HFT volume days when the HFT trigger orders are moving price and volume.

Remember that not every HFT buy or sell is profitable for them. This is a computer generated high frequency order system. The computer is far from infallible.

The first HFT action is out of a bottom. Smaller funds and retail traders who use share lots above 5000-10,000 lot size are trying to sell down this stock. TechniTrader® Quiet Accumulation TTQA shows this smaller fund and large lot selling effort. However Dark Pools are moving in at this level so price holds steady. HFTS discover the Dark Pools and trigger a gap up day on higher volume. As the Dark Pools shift the sentiment to the upside, seen by the red to green TTQA in December, the HFTS once again trigger causing price to move up again.

When HFTS are tracking Dark Pools the trend continues.

As the Dark Pools activity evaporates smaller funds and HFTs are driving price. Dark Pools have stopped buying. When HFTs discover this they start selling short, triggering the smaller funds and retail side to chase on the sell side, either selling out of a losing trade or trying to sell short.

However, the Dark Pools are NOT selling, distributing, or rotating. They simply stopped buying because price moved out of their buy zone. So as the price enters their buy zone, the Dark Pool orders start firing off again and this forms the bottom.

HFTs once again discover this, driving price up again for one day end of April. Since Dark Pools are still in the buy mode price moves up slightly in May. HFTs try to drive price up further but fail at the end of May. So the HFTS switch tactics and try to sell short, unfortunately for the HFT computers which are not able to see what you can see in your charts, the Dark Pools are triggered just as the HFTs try selling short again based on their computer algorithms.

Smaller funds chase the HFTs and lose money, because Dark Pools are consistently buying incrementally which now drives price.

The final long volume and green TTQA is a result of HFTs triggering after the Dark Pools have completed their buying for the moment.

The dynamics between the two largest and most dominant market participants in the market is important. By understanding how they move in and out of a stock and what patterns they create on the charts, you can learn to enter before the huge HFTs moves and avoid being on the wrong side of the trade.

Trade wisely,

Martha Stokes, C.M.T.