First, I don't know how that angry face got up on the title area, how do you remove it? LOL

Anyway, I've been trying to make a profit for about 1-1/2 years now, knew 100% of NOTHING before then and havent done very well since. It really is a long learning process, and I think also some are gifted more than others to see things inside the 'paintings' . I just can't get to the point of believing my instruments (indicators, charts, etc.)
Also, I'm the type that goes nuts when I don't see results. I guess I should be a day trader but don't have the knowledge, skills, time and nerves to do it correctly . I always want to see some action, watching a stock grow moss drives me insane, and until I can learn how to properly develope a sensible entry and exit strategy I will never beat the market. Hopefully Daves videos will help.

But when I do make gains are the following items listed below. (when I believe what they are telling me and don't try to second guess everything.)

MACD 12,26,9

EMA 4 and EMA 8 and EMA 20. When the EMA 4 crosses above the EMA20 this is a WATCH alert for me. Then when the EMA 4 crosses above the EMA 8 theres ususally a pop which happened around April 14; I also start looking for a trend reversal to the BULL side, which is shown in the second chart. I do not understand why it has to be the EMA instead of the MA, but the person sharing it with me insisted that it must be the EMA and not the MA.

Bollinger Bands: I like the 20,2 setting and the RSI 4. Notice around May 15 the BB's tightened up at the end of a month long consolidation and then the stock popped up to a BULL market! The BB's and EMA crossovers was the only things I really saw. I've been trying to learn Candlestick patterns for a year with little success. The ROC was a little helpful but the RSI was worthless in its prediction until after the reversal was already started. Maybe Dave would be kind enough to tear this chart apart and explain everything that was revealed, indicating a reversal.






Notice the ROC was dropping. Once again, I'm learning not to trust one indicator.

Hi Rich,

Welcome to the community this post is a great conversation starter so I am glad to have you.

I took the angry face off for you when you post a comment at the bottom there is a place that allows you to select the type of icon you want if any to go along with the post. Next time just select one of the smiley faces or no icon and you will be good to go;-)

The first thing I noticed and liked about your post was the part where you say talk about the things that are holding you back. You would be surprised at how many traders have no idea of this even after a year and a half in the market, so the fact that you are aware of your areas of weakness puts you ahead of a large portion of the pack. The videos in my free basics of trading course were also designed to help with some of these issues, so I hope you find them helpful.

As far as your trading method goes it seems from what you have posted below that you have many of the ingredients for the recipe that you are going to use to trade, but are not quite sure how to put them all together. With this in mind, if its ok with you, I would like to ask you a few questions and see if I cannot help you develop your recipe a little further.

If you are willing to work with me a bit on this then as a starting point let me know the answers to the following questions:

1. The first thing from your post that it sounds like you need to figure out is what style of trader that you want to be. You say in your post that you guess that you should be a day trader but that you don't have the knowledge, skills, time, and nerves to do it correctly.

While knowledge and skills can be developed and nerves can be improved somewhat, if you don't have the time to watch the market consistently, and don't want that type of pressure, then my question is why not try swing trading instead of day trading?

2. If you do not mind providing me with a few more details, I would appreciate the opportunity to learn more about your strategy. I see that you have several indicators which you look at, but my first question here is are there any steps that you go through when analyzing a chart before putting the indicators on, or do you start with the indicators?

3. I feel that it is important to know why you feel an indicator works the way that it does so you can better understand what it is telling you about the market, and therefore when it is appropriate to follow the guidance of an indicator and when it is probably not giving you the information that you need.

With this in mind, would you mind providing a little more information on why you use EMA's, Bollinger Bands, and RSI with the settings that you have chosen? If its simply because someone told you to that's ok, just let me know and then we can break it down a little further from there.

My apologies for all the questions but from looking at these charts there were some very clear signs here that were missed, so I feel that it would be better for me to help you figure out what they were, than for me to simply tell you what I see. I also think that if you go through this process with me, I can help you tighten up your strategy a bit so you can further solidify your approach to the market and make better trades in the future.

Look forward to hearing back from you.

Best Regards,
Dave

EXACTLY on target!

I have learned that swing and long term is best for me at this time. Day trading requires more time, experience in quick analysis, which I currently don’t have.


I start with news, indicators, trends and prayer. <g>
I do believe that the price includes the news, but not the future news that can develop like a storm in the ocean, clear sky’s then a tropical storm before you can drop anchor!

So, I do try to read some about the company, some fundamentals like current P/E and Future P/E, Beta, and TRENDS. Being a swing trade I cannot watch these tickers every minute, so the trend for me must be up or I risk the possibility of the stock going down and not coming back up for a year or more. I’m currently hurting with two stocks now because of this.

Then there is the Fast Money/Cramer scenario, where we get the daily recommendations but after we buy the stock we ask, “Ok, what’s next !” Where is the exit point, how long should we hold, what is there thinking, one day, two, three, a month? These shows can seriously hurt people, not by what they say but what they do NOT say!

Agreed, and the indicators I use are strictly from others recommendations and explanations, which I somewhat understand but not completely in all areas.
Using EMA’s vs MA was recommended on a blog that no longer is maintained, but The reason is because the Exponential MA reacts more readily to the recent price changes than the typical MA. When you have a crossover of the EMA (4,8,20) you have an indication of a trend, maybe very short but usually a POP of 5-8%. I’ve seen it many times in charts.

Bollinger Bands, I’ve learned that the candlesticks try to adjust always to the center, so once above the upper band the stock tries to correct, sometimes a very bullish/bearish trends the candlesticks will stay outside the BB’s. PCX and JRCC are good examples.
Another thing I’ve noticed with BB’s is during a consolidation, when the BB”s narrow their gap and price and volume stays the same, something big is about to happen. Consider BQI on June 8, 2008 to present; $4.60 to $8.60 in about a week.

RSI (4) is the strength of the buyers/sellers, being just one indicator to support a theorem of other indicators suggestion of a reversal of a trend. I like the 4 setting because it’s a little more aggressive for me to envision.


Agreed, and this is what is so frustrating. Its like part of the formula to the recipe is missing, and its written in a different lanquage

Thanks, sorry for the delay in responding.

Rich

Hey Rich,

Thanks for your detailed reply this helps me learn what you are doing so I can better offer my viewpoint. I also like this discussion as I think many traders have the same dilemma's that you are facing so maybe if you can I can make some progress here it will help others in the community as well.

Ok so from your responses below it seems that we have established a few things:

1. You have a many of the ingredients for the recipe of successful trading but are not quite sure how to put them together yet.

2. That you do not have the time to day trade so swing trading suites your situation the best.

3. That you use the news, trends, indicators and prayer to pick your trades.

4. You may also get some trading ideas from the Kramer, Fast money crowd but realize that there is a lot of information that they do not give you which can hurt you.

5. The indicators that you use are strictly from other people's recommendations and you have outlined what you understand about those indicators but admit that you do not fully understand them.

Ok so now lets go through each of these:

1. Since you have many of the ingredients for successful trading (we will refer to these as trading tools), now we need to figure out a recipe for putting those ingredients together into a successful recipe (which we will refer to as your trading plan).

The first thing that in my opinion you need to do here, and a big component that from what I have read it seems like you may be missing, is bringing order to how your trading tools are implemented so you can paint a picture in your mind of where the market may be heading, and identify profitable trading opportunities. Like with baking a cake, if you put your ingredients in the pot and cook them in the wrong order, you can have all the right ingredients and come up with a pretty crappy tasting cake.

So with this in mind I have a couple of questions here:

- What order to you use each of your trading tools? Do you for example look at the indicators first, then the news, then the trends, or use some other order?

- After you figure out which order you use each of your tools is why you use that order and what are you looking for each step to tell you about the market?

When thinking about the answer to this question keep in mind that each step or trading tool that you use should be used because it is telling you something about the market and each step should build on the last step towards painting a full picture for you of what is happening in a particular instrument.

2. You have decided that you are going to stick to swing trading so here you must simply have the disciplin to remember why you swing trade and not deviate from your methods.

3. This one feeds back into the questions I have asked for number 1.

4. It seems like here you have identified that taking ideas from Kramer and fast money does not work out so well because they aren't there to help you manage the trade once you are in it and to tell you when to close it.

I agree that these shows are highly dangerous because of exactly what you have said here. While I do think that they can be used to generate trading ideas the trading implementing those ideas must have his own framework for trading that he or she believes in or they are going to get severely burned.

With this in mind what I would suggest here is turning off those shows until you have a sound framework in place that you are confident in. At that point you may want to use these shows to generate possible ideas that you can then put through your own analysis and take trades only when that analysis tells you that they are good trades, not becuase someone else has.

5. In my opinion, in order for a trader to be successfull they must have a full understanding of what the indicators that they are using do and why they feel that they are going to work in their strategy. With this in mind I think that you agree that there is more that you need to learn about each of the indciators that you are using. I would recommend starting with the basics of each indicator and learning about what the purpose the person who developed the indicator developed it to be used for or what the main use of the thing is in general. For more information on indicators I recomend going over the lessons for the indicators that you use in module 3 of my free basics of trading course as well as checking out StockCharts.com] and [http://www.investopedia.com]Investopedia.com for more information on each.

I hope you find this helpful as I think that you are a good ways down the road with developing your strategy and that if we can tie up a few loose ends here you will be well on your way to profitable trading.

Look forward to hearing back from you.

Best Regards,
Dave

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Disclaimer: As always my posts are for educational purposes only. When making live trades traders should rely on their own analysis and take responsibility for their own trading. Trading is risky and can result in substantial financial loss.

I really never considered an order of investigation. Sometimes I would hear Cramer or search for a stock that appeared to have promise and then check it out in random order.

Yes, day trading at this time is not an option. I could go mid or long term but not day trade.


3. This one feeds back into the questions I have asked for number 1.

That doesn’t seem to be a problem lately <G> I’ve been working late every night for a whole month <G>

Yes, and lately I have been doing that. But when I first started out and for a very long time the information was overwhelming, like taking a primate and putting him in a third year biology class! Now things are starting to make some sense.

Hi Rich,

Thanks for the response.

It sounds to me like the first order of business should be to put together a plan on how you use the different tools you have available to you to look at the market and build a picture of where you think the market is heading and why.

If you would like help with this or have any questions on how to do that let me know and I am glad to help.

Best Regards,
Dave

David, in the previous posts you stated a few things that intrested me.

1. Why did you ask what sequence of investigation I used? Does one before the other make a difference?

2. You stated that there was more information in the charts that would show us things, may I ask what you see?

3. Entry/exits, I've watched your videos on Fib lines etc, but it takes time to learn those of course. What other information do you see ?

Thanks for the offer, I'll take you up on it

Have a good 4th....

Rich

Hi Rich,

Glad to hear back from you.

While I think it is important for each trader to develop their own unique style, I do feel that there are certain things that apply to pretty much any type of analysis, and having a step by step process as to how a trader looks at the market is in my opinion one of those things.

The reason why I feel this way is that not only should each tool a trader uses to analyze the market tell him or her something unique about the market, but it should also build upon the pieces of analysis that were done before it to paint a full picture of the market action.

Secondly, I feel that having a set methodology for the tools that a trader uses, and the order that those tools are implemented, helps traders form good habits, and makes it easier to see when something is missing or needs to be changed about the way that he or she is looking at the market.

An example of this would be multi timeframe analysis, which is a way of analyzing charts over multiple timeframes to get an overall feel for the direction of the market. Lets say for my multi timeframe analysis that I am going to look at a weekly, daily, 4 hour, and hourly chart with the goals of getting a feel for the long term, intermediate term, and short term trends in the chart. With this in mind would it make more sense to look at the hourly, then the weekly, then the 4 hour then the daily or to look at them in order of longest to shortest (weekly, daily, 4 hour, hourly)?

In my opinion it would make a lot more sense to look at them in order of longest to shortest, because doing it this way makes it so that each piece of analysis builds on the last piece of analysis, telling me not only something unique about the market, but also painting a fuller overall picture of the market action.

Same goes for indicators. Doesn't it make more sense to know what the overall trend in the market is, and where support and resistance levels are, before applying indicators which are designed to tell you how strong those trends are, or what the momentum is going into a specific support or resistance level?

Hindsight is obviously 20/20 however with the benefit of hindsight there are several things that jump out at me about OMNI's chart when looking at it using my own methods, and several things that jump out at me about the charts that you have posted with your indicators.

First let me start with what I see by simply looking at the charts fresh. I like to start my analysis by getting a feel for the longer term trend in the market by looking at the monthly, weekly, and then daily chart.

Not much interests me about the monthly chart, however there are two tings that I would note about the weekly chart which signaled this reversal, and then a continuation of it.

As you can see from the below chart the market was in a tight $3.30 to $4.40 range form the last week of January to the middle of April. When a market or individual stock goes into a long period of range bound conditions, generally when the market breaks out of that range the move is dramatic and there is from my experience as much higher probability that the market will continue in the direction of the breakout as it did here.

OMNI Weekly:




The second thing that I see about this chart is the flag pattern that formed after the breakout and the breakout of that flag pattern on high volume. Normally when I see a flag pattern form after a large candle like the one that formed on the breakout in the above chart, I give the market a higher probability of continuing the move higher, than I would otherwise. This is especially true when the topside breakout is accompanied by high volume.

OMNI Weekly:



The daily chart confirms what I see on the weekly chart with the breakout from the multi month range, which is then tested and holds as support, followed by two periods of consolidation, followed by high volume breakouts to the upside.

OMNI Daily:




So these are a few of the main things that I see, again with the benefit of hindsight, that should have signaled to me that the trend in the market was not only reversing but forcefully reversing.

Ok now when looking at your charts with the benefit of hindsight, one of the primary things that jumps out at me is the divergence in momentum that your indicators are signaling as the market goes into the range.

As the RSI, ROC, and MACD are all momentum indicators, a healthy downtrend should be accompanied by falling momentum indicators. As you can see from the chart below, as the market began its ranging period, each time the market traded down to the bottom of the range your momentum indicators were trending higher signaling divergence. All else being equal this signals to me that the market has a better chance of breaking out to the top of this range than the bottom.

OMNI Daily:



So if a trader were to have looked at these charts using similar analysis in a similar order to what I have outlined above, I think the charts would have shown a potential trading opportunity on the breakout of the top end of the range, or either of the follow through moves. The things that I would personally have not liked about trading the initial breakout are:

1. The initial breakout was not accompanied by high volume.

2. I generally prefer to trade in the direction of the trend and not reversals.

The fact that the market had been ranging for so long however combined with the fact that the candle that broke the top of the range was a large one would have negated some of the impact of the above two concerns.

Hope that helps. Now that you have seen how I broke this down can you see some value in looking at things in a specific order, and if so how do you feel that you can better organize the way that you look at the market?

If anyone else would like to chime in here with any questions or comments I would love to hear them.

Best Regards,
Dave

Hi Dave,

Thanks for the reply, what I especially enjoy is the fact that you took the time not only to reply but to insert all those links for the reader, thank you very much.

Being the 4th weekend I havent had a chance to stay on the computor, but will try to read your post In Depth tonight or tommorrow, there is a lot of information there to read.

Thanks again, will post in the next day or two

Rich

Sounds good Rich enjoy the weekend.

Best Regards,
Dave