9 Trading Lessons You Must Read
Presented by ITMS NEWS
Today
we bring you even more great, short lessons from the past. With the
holiday approaching and the new year almost here, this is the best time
to advance your trading skills and be ready to attack next year. Those
who truly succeed in the market and earn massive wealth, are those who
respect and understand the importance of constant learning.
Making
millions of dollars from the markets is not impossible, however, you
must learn from those who do just that. Learn and you will earn like the
best of them!
We have laid out the best, most optimal way to get you on the right path, making 2013 your best most profitable year EVER! Click here to learn more...
Understanding Bottoming And Topping Tails
Most
traders do not put all the pieces of the puzzle together when learning
and using technical analysis. Let's talk about topping and bottoming
tails. Simply put, a bottoming tail is a bullish signal and a topping
tail is bearish. A bottoming tail MUST occur at the lows of a chart.
This means that no point on the chart in recent history can be lower.
Next, the tail must be substantial, not just a little thing barely seen
by the eye. Additionally, the close of the candle must be in the upper
25% when measuring from the lows to the highs. If all these factors
match up, you may have a bottoming tail. The same things apply for a
topping tail.
Trade Lesson: How To Locate And Trade An Extended Move
Sometimes
stocks will break out or break down in a very sharp and steep angle on
the charts. These type of patterns are often referred to as a parabolic
move when they surge to the upside. When these patterns occur to the
downside they will often be referred to as a falling knife or waterfall
decline. The actual name is irrelevant, however, understanding the chart
pattern is very important. As a general rule, if you ever put a
protractor up to your screen from any pivot low or pivot top and the
angle is more than 60 degrees it is usually unsustainable. It does not
matter if the stock or commodity is rallying or declining. The technique
I will show you here will help to identify when the equity is running
out of steam in either direction, and will need to retrace and
consolidate some of its move.
Step 1. Scan through stock charts and find a time when a stock was extremely extended from its 20 (SMA) simple moving average.
Step
2. Determine the distance of where the stock was trading from the 20
moving average. If you use eSignal charting software this can be done
easily with the segment tool; simply right click, hit copy, that line
will be duplicated and can be placed where you want it. If are not using
eSignal, simply calculate the distance of the stock from the 20 MA and
draw a vertical line to reflect it.
Step
3. Take this distance and place the line on your chart. Follow the 20
SMA with the line; if at any point the stock price exceeds the length of
the line from the 20 SMA, this will be your opportunity for a trade.
Wait patiently, anytime price gets above or below the distance of the
line, go long or short the stock. In this example, we are looking to
enter a short position when price exceeds the distance of the line to
the upside. Note the example below.
