Start annotating your price charts with channels (3-point channels) and learn the correlation of price movement in the channels with volume. Do this for 50 days straight. You will learn how price moves and what to anticipate next. What are you looking for? The overlap of channels.
I completely AGREE with you Best advise give in this thread so far. Please share how you filter for Strong Stocks or Weak Stocks and do you downtime / uptime and how you do it.
That's the easiest part. You can use a scanner, or just a gainers/losers list. For example anything +1%, >500k volume with >2 times relative volume would satisfy the strength criteria. After trading this stuff for a while you will begin to learn what is comfortable for you. Maybe you prefer thicker traded lower priced stocks that trade >1M/day, or maybe you like the thinner more wild high priced stuff. These are the things you learn to narrow down your style and become a pro at that one thing. That's all you need to make a living in this business. EDIT: I want to add...if you are trading something that doesn't show higher than normal volatility on that day you are wasting your time. Find the volatility and trade that instead. There are great trends out there every day that anyone can easily be a part of with basic entry and trade management rules.
That's due to the fact that your brain will subconsciously pick out patterns, etc from the chart.....
Hi dustin, just want to clarify. Your definition of a strong stock in your quote is based on CURRENT day only right? Not if it's moving up in the past 6 months etc..? But then my question is also how do you define a strong stock? Becuase when the market opens, noone knows if a stock will be strong or weak for the day. It only becomes clear after the market is running for a while. Do you scan based on yesterday's action to determine what is a strong or weak stock today? thanks
Dustin, I really appreciate your advice. I've been trading since '05 at a prop firm. It is so easy to get into the trap of shorting the strongest stock on your screen ("it can't go any higher, can it?), or buying the weakest. I've read many of your posts after noticing your results in the Trader P&L thread last year. I am currently working to tweak my trading to incorporate some of your scanning ideas (I usually scalp a small group of big-cap high volume stocks). Anyway, just wanted to give you some props for your sound advice and common-sense approach!
will someone go one step further and explain some details in Holy Grail's point and figure chart. Are the blue Xs all certain number of contracts trading at a certain price and the red Os the price levels at which a certain number of contracts traded at ????
I guess you didn't even have enough curiosity to find out what a p&f chart reflects. Good luck with trading if that is the amount of effort you are willing to put into it.