Where Do Stock Trading Concepts Come From When You Dont Know Where to Look
- Posted by admin on April 25th, 2009 filed in Finance
I hear it all the time. “I know how to read charts, but where do I find something for stock trading, there is so much going on I am always missing stuff.” This happens all the time, to many many people. Investing, not so often, because you are on a much higher time frame to hold, you have plenty of time to do your research AND the media and stock analysts bombard you with information. When it comes to trading, whether it be day trading or swing trading (holding for days to weeks), its harder to find ideas that are timely if you don’t know how to do it.
I will break it down into a few steps that will seem simple after you try them. I am assuming everyone who is reading this is familiar with charting basics, and has access to real time data, and is ready to learn how to find ideas for stock trading
1. Make sure you have access to a real charting program.
By real, I mean not a static chart on a web page – you need a dynamic, real time updating chart. Usually these will be stand alone programs. Do not use delayed quotes – it does not cost that much for real time quotes. You cannot trade effectively at all with delayed quotes, and if you are serious about trading in any capacity, you will need to pay for quotes. A lot of brokerages will offer them for free with minimum trading amounts each month. Just make sure the charting program they offer is full featured.
2. Go to Standard and Poor’s (or any other site, does not matter) and get a list of all the sector SPDR’s.
In addition, there are many other ETF’s that represent sectors and industries. This is essential. Open a daily chart, and put in any 1 of the symbols, it does not matter. On the daily chart, put a 5 period simple moving average and a 13 period simple moving average. In addition, put a 20 period linear regression line (close based) on the chart. Almost every charting package will have access to this. You will only have to do this once a week.
3. Create a list on paper or spreadsheet labeled: Daily Up, Daily Down.
We want to go thru each ETF symbol over the weekend and find the actual trend of the sector. Type each symbol into the daily chart. If the slope of the linear regression is up AND the stock is above the 13 period average, the trend is up. If the slope of the linear regression is down and the stock is below the 13 period average, then the trend is down. Mark the ETF in the up or down column. This gives us the overall sector trend for the week. Once you get more adept at it, you can start to differentiate between strong up, up and strong down and just down. If it’s hard to tell the difference (up or down) then just pass on that name, don’t put it in either column. As you get more experienced, this part will get very easy to do.
4. You should now go back on the internet and print out the top 3 names from each sector on your up down list by market cap.
This information is easy to find using Google. You want the names that comprise the ETF – this is what you will trade. Of course, you can trade the ETF too, if you wish. You only have to do this every few months (the breakdown list within the sector ETFs). Once you have them, put them on a spreadsheet to keep. Take the names for the ups first. This is your watch list for longs. Open another chart, a 60 minute chart with the same indicators as above. Make a note on each of the ups if the 60 minute is up or down. This can be done each day before the market opens, or after the close. It can also be done on the fly during the market, but you just need a frame of reference.
Note the highest high in the last 10 bars (the highest point) where the stock makes a / top (goes up then backs away. Note the lowest low in the last 10 bars(lowest point) where the stock makes a V bottom (goes down then climbs away). This will be your near term support and resistance points for breakouts. You can program your quote system to alert you on each name if they get near those points (usually within
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