CHART TRADING
Nothing in life is foolproof and that certainly includes chart reading. I have never met anyone who has the ability to see into the future and anything can happen to change the path of the current chart movement in an instant.
Fortunately for you I have formulated a “sure-fire” method of selecting stocks to trade. Here is all you have to do to get a solid read at a potential entry position on a stock:
* begin by looking at the candles,
* the Bollinger Bands (BBs),
* the Relative Strength Index (RSI),
* current trading volume compared to normal average trading volume,
* current market condition,
* recent economic news released within the past 10 minutes,
* scheduled economic data to be released within the next 30 minutes,
* find out if the President of the United States is speaking coming on TV,
* is the Federal Open Market Committee getting ready to release their decision on interest rates
* check the 20, 50, 100 and 200 day moving averages
* check the daily, weekly and minute by minute charts
* sector trends
* foreign market influences
It is as simple as that!
Yes; I know my list is silly and exaggerated but it is meant to illustrate the numerous factors that can contribute to your decision making process. As you develop and come to trust your own list of pre-trade priorities, the selection process becomes easier. As you gain experience trading, you will weed out certain information and come to trust certain technical indicators over others. To sum it up, from the time you decide that you are considering a position in a stock, the list of things to think about up to the point that you pull the trigger, have to be taken into consideration. All in the matter of a split second or less.
The same is true when unwinding a position. Traders should discipline themselves to follow a standard pattern of exiting a position. When you are in a long position and the price is moving steadily higher, consider taking profits during the climb, don’t wait for it to top out before you decide to exit your position. Same thing for a short selling position, as the price move steadily lower, consider taking profits during the fall, not when the price bottoms out and start to reverse.
While the strategy of reading charts is rather simple, stocks will not always move in your desired direction, tick by tick. Traders need to be alert at all times for any sudden movement in a stock’s price on the chart in order to attempt to exit a position at their discretion and not become an investor or get stuck in a position because they did not exit in time.
As a result you need to expect the unexpected at all times and not walk away from any open position while you are day trading or swing trading. You absolutely must be sure to have stop loss orders and limit orders in place to cover your open positions.
Successful chart reading takes time and patience. It is vital to remember that at no time will any method a trader develops become 100% foolproof. Successful chart reading consists of expecting the unexpected and being prepared to react instantaneously.
