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Best Indicators

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Best Indicatorsdavidkordack09-May-12  03:24 pm
         

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davidkordack
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Hello, wondering what the best indicators are when you are considering shorting a stock?
Thanks,
David


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gamefisherman
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Hi David
Welcome to the IC forums..
Your question is an interesting one and with the information provided I can only provide you with some general suggestions/ideas.

Some people/traders/investors tend to view "indicators" as a way of trading ie they might say for example 'the share price has bounced off the 200SMA therefore I will enter the trade'. Whether going long or short, technical indicators are only one part of the equation. They must form part of an overall trading strategy that has been back-tested, strictly adhered to at all times, monitored/reviewed periodically ( a topic for another time and there are already many postings on this area) Therefore in short (pardon the pun), whatever TA indicators that you use, firstly make sure that they form part of your overall trading strategy, and are not purely used in isolation.

Also, tight money management is the key to protecting your capital. You need to ensure that your winning trades exceed the amount of losing trades. As well, you must have a pre-determined stop loss figure worked out before the trade is entered, worked out your position size, and profit target. In other words, the whole trade from who to go is a purely mechanical operation that takes the fear, emotion and greed out of the question full-stop. Only once you have mastered the above going long should you consider going short imho. As I have no idea how long and experienced you are with trading, what instruments you trade i.e. indices, EFTís etc I can only give some general suggestions.

Unless you adopt a strategy that will assist you in determining valid entries and exits with the chosen TA indicators, you will struggle to be successful. What I mean by this is that just because a particular indicator is showing a specific reading, does not in isolation necessarily mean that a trade should be entered. For example, if you are using a system of Moving Averages to help you identify potential trades, signals need to be validated by other factors such as volume. If stock has broken through from a key support area, you need to check whether it was done so with a volume confirmation. What I mean by this, is that unless you are taking an overall picture of a particular stock, using multiple TA tools to check the validity of an entry, you may risk entering at the wrong time when you pull the trigger. Volume is an important indicator on its own, and again, I would recommend that you do some reading around this area.

Each trader will have their own set of preferred TA indicators and trading system that they use, and assuming that you have already become proficient at going long with your own system, one way to look at going short is to simply reverse the conditions that you already use to go long. In addition, many professional and successful traders will adopt different TA indicators according to the prevailing market conditions at the time (again a topic for another time and there are already many postings on this topic in the forums and Colinís library.)

Secondly, you need to consider the time frame in which you are going short ie intraday, weekly or longer etc as the time frame adopted will somewhat dictate how the TA's are setup. For example, if you were trading short, you may add a 70/30 14day RSI to assist with discovering if a stock is overbought or oversold and hence a potential candidate for a short trade. However, again, the timeframe in which you are comfortable to hold for will dictate how you set up these particular indicators. To give you the greatest chance of getting into a winning trade, TA indicators should be used in conjunction with others. I suggest that you spend the time reading through all of Colinís library on Technical Indicators and note down those that might fit into your timeframe, and those that can be altered to suit that. For example, you may decide to use the Twiggs Money flow as another tool to assist you in stock selection. The question you will need to answer is at what point will this particular indicator assist me to identify a potential candidate. If you set up the Twiggs with a 63 day, 14 day and 7 day, you should get a pretty good idea of both the medium term and shorter term direction of money flows. This leads me into my next point.

Thirdly, Once you have worked out your comfort levels for holding times, you then need to setup your charting periods to reflect this. For example, and again using the assumption that you are the type of trader that likes to only hold for a short time, then you need to setup your intraday charts on your live platform, e.g. 30 min charts imho give a good picture of the trend present at that time, remembering the shorter the time frame, the higher you risk getting in on the wrong side of the broader/bigger trend. Using say a 5 day 30 min or 10day 30/60min chart is a good start if you are looking for a short term trade. The longer the time period you are comfortable to trade, the longer you should look at the broader trends, using Moving Averages. Many traders here use a 5daySMA, 10daySMA, 30EMA and either a 150 or 200EMA to discover the direction of the prevailing trend. Trade the trend and make sure you are on the right side of it. Remember that all stocks will experience pullbacks or advances in their journey, and this is where the art of trading comes in. By this, I mean that you need to be able to determine whether the advance in terms of a short, is a genuine change in the prevailing trend, or just a normal part of the downward movement. Pivot point analysis is another area that I suggest you research on as well as Fibonacci Analysis.

Fourthly, use indicators to assist you in finding divergences for signals as possible entry points. Again refer to the library as you work through Colinís excellent explanations on various indicators.

Fifthly, become proficient at reading the chart. The use of candlesticks and their various meanings can also be helpful. You donít need to become an expert on them, but do need a solid understanding of the picture that they paint. Being able to look at a chart and be able to see pennants, triangles, flags etc is also another tool to learn and again I would refer you back to the library.

Finally, many traders underestimate the importance of both staying in the trade as long as possible, and the exit. Whilst I am out of time, I suggest that you research this area extensively. It may well be a couple of trades that are highly profitable that get you over the line each year. But, had you bailed early, you may have only received a small portion of the profit to be had.

I hope there is something that you can take away from here to help, and wish you well with the trading.
Cheers
GF







Protect your capital and the rest will take care of itself with a solid trading plan that is adhered to every trade (PS THIS IS WRITTEN TO KEEP REMINDING ME TO STAY FOCUSSED AND FORGET NOISE)

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tradepros
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Monday, April 09, 2012 - 11:50 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I would suggest a basic macd, in the beginning


Sincerely,


Dominic Mancini

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espresso
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Tuesday, April 10, 2012 - 03:53 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



yep I second MACD with volume
cheers


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spdfgh
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Heikin-Ashi candlesticks by far the BEST indicator/chart technique.


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colin_twiggs
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Twiggs Money Flow (of course) and Keltner Bands (Channels).
  • 13-week
  • 52-week, 52-week, 1, 1



My views expressed on this forum do not consider your personal circumstances and should not be considered as financial advice. Please conduct your own research.

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spdfgh
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Twiggs Money Flow (of course) and Keltner Bands (Channels).

13-week
52-week, 52-week, 1, 1


Is your TMF a 13 week
and the Keltner's a 52 week 1,1?
I just want to see what they look like.
Thanks.


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colin_twiggs
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This is for long-term trend-following:

Keltner Channels (not the Original): Weekly 52, 52, 1, 1. Signals are taken when price closes below/above the opposite band.

Use 13-week Twiggs Money Flow to identify stocks to trade.

I use additional chart pattern filters on the entry to reduce false starts. Too complicated to explain here but I intend to build this into a course.


My views expressed on this forum do not consider your personal circumstances and should not be considered as financial advice. Please conduct your own research.

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spdfgh
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Most interested in the course you mention.

My biggest issue in trading has been my entries are invariably late and at too high a price, or fall forcing me to sell at loss, or in some cases holding in hope after it falls beyond a stop loss point, by far the hardest thing is a confident entry at the right price to ensure a positive gain not loss.

It has been harder to find stocks that are consistently trending lately, stocks seem to pop in a day then retrace over weeks. Gambling on entries is the reason why I'm looking at other charting/market systems for detailed market analysis in the form of order detail to identify stocks that have greatly increased interest. Or in fact subscribing to a quantitative system where you receive buy sell instructions.

I would like to know what stocks are long term trending at the moment, I don't seem to be able to find many in a reasonable price range (0.50 to $3.00) apart from WHC, of which I'm reluctant to get on board as they now look overbought, and Murphy's rule in all its variants seems to apply to my trading lately.

I have always had trouble with indicators hence my love affair with the H-A candles.

The Twiggs Money Flow seems an indicator that tracks price bounces closely, it looks like a price oscillator, what defines the money flow aspect of this indicator, is it volume based?


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colin_twiggs
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The course is taking a long time to build but we will have the first videos (Candlesticks) shortly. Trend entries and exits will only be ready next year I expect.

Trading breakouts is a low probability game with long runs of losses and occasional big wins. Late entries are important to confirm the trend is real.

Twiggs Money Flow is great for highlighting opportunities. Also divergences often give early warning of reversals. It combines price and volume. See http://www.incrediblecharts.com/indicators/twiggs_money_flow.php for details.







My views expressed on this forum do not consider your personal circumstances and should not be considered as financial advice. Please conduct your own research.

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jjll29
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I would try to access the overall market direction first, and if it is going up, them identify the stronger sectors then the stronger stocks in those sectos. TMF, MACD and Volume is my essentials.

Jason

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