Day Trading Advice: The World Is In The Charts
Check out this video from Lightspeed Trading's Trader Talk Series. A real trader gives insight on how to read charts effectively and how to guage a stock based on its activity. Visit http://www.lightspeedtrading.com/tradertalk.aspx for more unfair advantages!
Step 1: News In The Charts
News is not a relevance to me. I keep things very simply. I feel that news is typically in the charts already. There are people out there who know something that we don't know or before the news hits the wire and I feel it's already in the chart.
Step 2: Focus On The Charts
So I don't put as much emphasis on news that a lot of traders may do. So my number one focus is always the chart. I don't look at fundamental analysis at all. It's all technical and variant. That's pretty much my main concern.
When I'm looking at charts, typically what I'm looking for, off the open is relative strength the first five or ten minutes, a huge move up whether it be 50 cents, a dollar or a couple of dollars or a huge move down.
Step 3: Reading The Charts
After that, maybe a small bounce; definitely, and the bounce has to be less than 50 percent or a consolidation near the low or the high. That's typically what works for me. I know my risk is small, and it's clearly buying or selling off the open that's dictated into the chart. So, it'll be a long green (if your charts are green), a long up bar or a long down bar and then a couple of bars coming back to maybe round as a U shape pattern.
Try to get in at the top of that U or like I said before, a consolidation maybe four or five, 10, 15 minutes, as long as it's near the low or near the high.
Step 4: Strength Indicators
It's also very important for me when I'm looking at charts is I have all my stocks on top of the S's. So, if the SP's have a huge move up and the stock doesn't make a new high I can clearly see it on the chart and engage my own relative strength without other indicators.
