Archive for Technical
Someone asked what I mean by “custom tick divergence” in my real-time commentaries. Here are 5 charts (one day each) for the past week with Emini S&P, $Tick index and my DNO_Tick1K index. (You can expand them to full size for better viewing.)
First of all if you do not know what Tick1K is then continue to read this paragraph. If you do know what it is then you can skip to the next one. Tick1K is a specialized breadth calculation on a basket of symbols that sums up the last 1000 ticks of each and every one of the symbols in the basket. It is designed to overcome various weaknesses in the standard $tick index. For more information about $tick index and what custom tick indices are refer to my S&P Tick16 article.
Now, an explanation of what DNO is. It is simply my short form for the basket of symbols combining Dow 30, NDX 100, and OEX 100. Thus DNO_Tick1K is the Tick1K index based on this special basket of symbols.
$TICK vs DNO_TICK1K
On all 5 charts, it is clear that $tick is noisy and the quality as a momentum indicator has degraded significantly since its days as the king of daytrading indicators 10 to 15 years ago.
What I look for from DNO_Tick1K are the same as any other momentum indicators,
- Retest of extreme level
- Swing divergence from price within 10 to 15 minutes window
- Kiss of zero line bounce
A combination of the last 2 at important price levels is a very powerful formation signaling a change in trend.
Using DNO_Tick1K has another advantage. There is this 10 to 15 seconds lead that you cannot get from any other indicators. $Tick is supposed to have a similar but less profound leading quality (2 to 5 seconds). Unluckily, the exchanges are only broadcasting the update every 15 to 30 seconds, so the lead is not usable anyway.
Charts from Feb 14 to Feb 18
Most beginners in trading heard about the concept of tape reading. Unluckily, there is not much materials available that explains it in details. I hope I can provide some guidance here for our readers to learn the basics of tape reading.
Have you ever wish for the moving averages to crossover earlier? I am going to show you a way to detect moving average crossovers before they actually happen.
Here is an extremely simple trading system that violates the classic rule of trading, trend is your friend, with very good results. It is an excellent example that illustrates how counter-trend approaches work.
Here is a first look at forex brokerage data on a side by side basis. For many beginners who just started trading Forex, this is a very good introduction into the world of dealer market data.
Knowing just your odds with a particular trading setup may not be enough. You need to know the various possible scenarios that may unfold so that you are ready to handle them. Here is a tool that helps you study your trading setups using time distribution analysis.
Since the first Basic Chart Reading article was written, I received many emails asking the fundamental question, “What is Divergence?”. I will try to explain what I know about this concept, hopefully, as precise as possible.
There are some more interesting differences between Forex trading and stock/index future trading. I will continue my discussion in this second instalment.
Stochastics is one of the most widely used technical indicators in the world. Surprisely, most traders like to modify the original indicator into something else because they find the original implementation too noisy.
I am going to show you a trading setup using the original Stochastics SlowK indicator that works very well on daily data across many stocks that I think you will consider re-examine this classic technical indicator once more.
Many traders spent weeks, even months to create their perfect trading models. Happy with the results they see in their backtesting, and tracked the real-time performance for certain period of time, they are ready to take the leap of faith to trade their models live.
Could that be just a bit too early? Well, that depends on how prepared the person is. Unluckily, I have to say that many of these traders (rookie system designers) are getting their worst nightmares and rudest awakening.