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Trend Days

Wednesday, 16 November 2011 21:33

With so many different trading strategies for forex, it can be easy to dismiss Trend Days as just another fad to take the fancy of over-fussy investors. However, the concept has taken a real hold on the market and many top traders have incorporated the principles into their trading plan.

Trend days are slightly different to simply watching the general pattern of the market; it is about identifying a day when the market is likely to swing significantly. A good summary of a trend day is one which opens at one end of the range, then shortly before the close, the market swings and closes at the extreme opposite end of the day`s trading scale. As a general rule, trend days swing more than three times as much as a regular session, with far less intra-day movement and also show some potential for range expansion.

A trend day does not necessarily have to travel in the same direction as the previous trends seen on daily charts and it is not possible to spot one from merely the opening price. However, the key lies in the increased spread between the opening and closing positions of just one session.

Of course this kind of day offers significant opportunities for gains but it is essential to be able to predict when a trend day will occur, or even identify that you are in the middle of what is likely to become one. Opinion is divided about the best ways to do this but there are some common lines of thought amongst industry experts.

The general consensus is that it is possible to spot a trend day after the market has opened, with a significant overnight gap one indicator worth looking out for. Failure to retrace more than 50% of the gap is another marker for a trend day, in addition to high volumes. Later in the session far greater degrees of volatility will be seen, confirmation that your early suspicion of it being a trend day was correct. Checking the range over the past seven days will also give an idea of whether the market has hit a trend day, as the narrowest price range seen over a seven day period normally precipitates it. A tight contraction of the range on the previous range should also provide a hint that the following session may be a trend day as the markets attempt to reclaim the average movement.

The vast majority of the swing seen on a trend day occurs within the last hour of the session, whilst very little takes place within the opening 60 minutes. Some experts have estimated that less than 10% of the total range of the day is seen within the first hour of trading.

Individuals who are able to predict or spot trend days quickly say that a significant amount of their returns are made on these type of market days, but they also have potential for great losses if they are not identified as a trend day, especially with the surge in volatility later on. http://www.forexlore.com">Forex currency trading is not a simple art but by looking out for some of the key indicators it is possible to go some way towards predicting what the markets are likely to do.

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Tomorrow's trading today.

Tuesday, 11 October 2011 13:57

In my intra day analysis on stocks and indices I am formulating a setup for the rest of today and into tomorrow which will tell me if this rally is for real or just short covering.

The first part of the thesis hinges on a group of stocks that have rallied strong, are yet to be overbought but nearing resistance on the daily chart: AGU, POT CF, AAPL, BIDU, CAT, BAC, APKT are a good list of examples. Similar characteristics are a Daily MACD positive cross, but below the zero line on the daily and intra day all but BIDU are on an R4 breakout buy signal..

The next part of the thesis is the broad markets ESZ1 and NQZ1, neither index is breaking out intra day or overbought on the daily charts after an excellent run up.

The last part of the thesis is that names that have been technically strong such as IBM, SNDK, CTSH and CELG are now all overbought on the 14 day RSI.

My mind interprets all of these factors into the following thesis as I write this at 2 pm on October 11, 2011: The broad indices and the names listed in part 1 of the thesis rally strong into the close of today and/or the close of today and the open of tomorrow, I mean really strong. Strong enough to get them overbought which none of those names are close to doing at this point. The velocity of this move is important so the RSI can move up quickly into resistance. A break of these key levels means the market is full of real buyers and a fail means that the shorts got scared and it may be time to head back down for a testing of support.

On ESZ1 the 1210 to 1215 level is my target for this move and a pullback to 1167 is where I would be covering a short trade. NQZ1 the target is 2315 to 2320 with a pullback to 2252 as support.

AGU: target is $77.50 to $79.75

POT: target is $50.10

CF: target is $153

AAPL: target is $404

BIDU: target is $130.50

CAT: target is $83.00

BAC: target is $7.04

APKT: target is $44.35

Target is the level of resistance that I am watching to either short against or realize this is a strong rally. There are a number of other names out there, steel sector, Ag names, financial stocks. Not seeing the strong names rally today alerted me to this thesis. If this does not happen by 10 am tomorrow than I will have to reassess what my market “tell” is.

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What a week!

Friday, 07 October 2011 07:43

Massive market moves, first week of the new training program and a redesign of the DAILY TECHNICIAN made for me a very busy and gratifying week of work. As Friday is just starting it is not time for me to rest just yet but today will most likely be a teaching day and then get some work done and get home early.

How many of you out there have blow your entire week on a Friday, or even worse a Friday afternoon? Go ahead raise your hand, don't be embarassed, it's ok this is a safe place. If you have read my book then you know that my hand has been raised for about 10 years. I have blown so much money on Friday's that I am glad I do not know the actual number. My rationale is that the volume slows down and the volatility remains and therefore my techniques do not work as well.

I truly do not know the "why" but I do know the pain of loss and having to carry that pain all weekend long. Nothing is more empowering to a trader than a great trading streak and if you can take that feeling over a weekend the empowerment multiplies. My advice is to set a number that is no more than 20% of what your positive week has been so far and use that as your daily stop out. I do think this is a negative place to come from but it is better to be prepared than not.

This has been a great week to make money and I hope that you all had massive success. Feel free to email me and let me know how you are doing. Have a great weekend.

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