Technical Examination
Technical Examination
Technical Examination
Position trading in my view, is simply taking a position in the market and following a tighter line than trend trading, therefore taking a position averages from one to six months with three months being the average trade. This trade length and type of trading is partly fundamental and partly technical. There are technical charting services that deliver daily charts on technical charting analysis that also cost around $1000 annually such as the tradinglevels sending out a chart a day.
For trading in shorter terms such as momentum and swing and there are a host of other names for shorter term trading and they range from one day to one month, typically 2 to 5 days there are services that can assist, but the problem is that when these companies put out the trade, there are too many traders getting in at once and all they do is push the price up for the day and the next day there are no new buyers and the stock drops. Actually with short term trading and day trading, you're on your own. You want systems and methods for trading and this is where the real work begins as a trader. Once again the questions are:
what is your trading time frame
what's your method
have you tested your new method
have you worked out a financial trade plan, that fits in with the bigger picture.
The most common mistake, with short term trading is that new traders don't have a trading plan set in concrete and if they do they can't stick to it. There are many trading ideas out there that can generate capital; therefore it's just a lack of discipline and money management.
A minimal Swing system
Finding a trade can be as easy as scanning the market for the 52 week new high or a simple pull back in a stock that is trading above a 20 and 40 period moving average. You still need to have a simple set-up entry, stop and profit exit and know much you're willing to risk on the trade this amount is dictated in your financial plan.
Swing trade example
In this daily chart the method is very simple:
The indicator in the lower pane is the CCI (Commodity Channel Index), parameters set on 5. Set-up is when it pulls back to -100 (green line)
Two simple Moving Averages - 20 and 40 MA. Market pulls back and touches green 20 MA, also note the market is above 40MA, this offers a stronger trend. So the CCI indicator and the price pull back onto the 20 MA.
Read the Robo method in Section 4.2 Trading Strategies for the entry strategy.
Stop loss must go under the low i.e. the red bar. Never enter a trade without knowing where the stop is going, place the stop in the market, and don't use mental stops.
Know exactly how much you are risking on every trade. This is a really simple idea for finding trades, with a reasonable probability of success as with this method you're trading with the trend and they are easy to find and monitor.
Searching for trades with software programs
There are numerous end of day software programs that are low-cost such as Metastock that you can use to search scan the whole market looking for any thing you can think of, simple as large volume days to quite sophisticated strategy searches, many traders have written searching program for Metatstock, there are standard searches in the program or you can write your own, you will need to buy end of day data for these types programs which on average costs around $350 for the year. There are stand alone programs designed just for finding trades, they can make the task of deciding what to buy or sell quicker, easier to test and modify and can help remove the emotional aspect from trading, Scan-vest is a local product. There are more advance programs, however they start costing, such as Trade-Station and more open source programs but these are for programmers. But to get started you need not to spend a lot of money, in fact many systems that people sell on the web simply don't work no matter how much they are asking for them, keep it simple and cost effective. A serious mentor and lots of books is the go. Many traders including myself find trades simply by creating a watch list and each night flick through the watch list, I probably go over board and go through a good few hundred, this takes about an hour, but from this I know what and when to trade.
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