Why You Shouldn't Rely on Technical Indicators Alone

Written on 02-02-2009 7:43 am by Craig

Why You Shouldn't Rely on Technical Indicators Alone

I like using Williams %R.

It gives a good general idea of when the market is about to reverse. But (like all technical indicators) it has it's flaws.

Take a look at the following chart:

S&P 500 daily chart

Last week, there was a rally in the S&P 500 and Williams %R was overbought. So, according to or market timing rules, we should look to get short - right?

Not so fast.

Look at the hourly chart:

S&P 500 Hourly Chart

Very bullish!

  1. Rounding bottom
  2. Broken trend line
  3. 10 MA just crossed above 30 MA
  4. Ascending triangle

With an ascending triangle, we really do not know which direction the breakout will be. My best guess is that the market will break to the upside because the rising bottom of an ascending triangle implies that there is increasing demand.

But, I would be hesitant to load up on short positions until I can confirm the breakout direction.

The market did eventually break out to the upside.

The problem with overbought/oversold types of technical indicators is that markets tend to become more overbought or more oversold. This can result in some very sloppy trades if you are making decisions based on technical indicators alone.

Written on 02-02-2009 8:17 am by Craig

Zecco: Zero Commission Cost? Not so Much...

As of March 1st, Zecco will be changing its pricing structure.

I'm writing to tell you that as of March 1st, 2009, we're increasing the minimum level of assets needed to earn 10 free trades per month to $25,000. We're also adding a new way to get free trades: customers who make at least 25 total trades per month will also qualify for 10 free stock trades per month.

Many traders are very disappointed by this move since the free trading was the main draw for those with less than $25,000 in their account. After all, Zecco stands for "Zero Commission Cost".

So, what is the reason for this pricing change?

Anyone who's read a newspaper lately knows that the US and world economies have been hit hard over the past 4 months. As a result, some of the largest corporations in the world have had to cut costs and adjust to new business realities. With reduced retail trading volumes and lower interest rates, we at Zecco Trading simply could no longer provide free trades to as many people as we would like.

In the words of Rahm Emanuel, "You never want a serious crisis to go to waste".


Written on 05-02-2009 9:56 am by Craig

Blogging Finally Comes to StockCharts.com!

StockCharts.com has finally added blogs to their website (8 to be exact). Well, it's about time!

We've just added a brand new section to the website that contains a collection of Blogs (web articles) dedicated to Technical Analysis and our website. This is a significant new direction for us. Several of the blogs are meant to eventually replace features that are currently on the website in older formats (the "Mailbag Blog" for instance) while several of the blogs are completely new ("Don't Ignore This Chart!" for example). You'll also find the new home for our "ChartWatchers" newsletter there. All of these blogs are free for anyone to read and will be updated regularly. Please see the first entry in the new "Chip Anderson" blog for more details. Enjoy!

You can see the first post by Chip Anderson here.

And you can see a list of all the blogs here.

It may be a bit of overkill to have so many blogs on a variety of different topics but I am glad for the addition, nonetheless!

Beginners: Learn the Basics

Intermediate: Trading Strategy

Advanced: Swing Trading Tactics