How to Use Relative Strength to Find Winning Trades

Written on 04-08-2009 3:39 pm by Craig

How to Use Relative Strength to Find Winning Trades

How do you use relative strength to find winning trades? There are two ways that I use it. Take a look at this chart of the S&P 500:

relative strength on a stock chart

Now look at this chart of GME:

relative strength on a stock chart

In this example, you can see that the market is going up, but the chart of GME is going down. The market is above the 200 period moving average (bullish) but GME is below the 200 period moving average (bearish). This tells us that GME has relative weakness. So, GME is a good candidate for a stock to short.

Now, look at this...

relative strength day

On July 27th, the market was up for the day. Now look at GME again...

relative strength daily

On the same day that the market was up, GME was down - a further sign of weakness. So, you can tell if a stock is strong or weak by looking at the price action relative to the market itself. Ideally, you want to buy stocks that are strong compared to the market and short stocks that are weak compared to the market.

This analysis will increase the probability of a winning trade.

Written on 18-08-2009 4:11 pm by Craig

Technical Analysis DVD's For Less Than a Dollar?

You bet.

My trading store is having a DVD clearance sale this month - and some of these prices are really low. Today I picked up The First Rule of Trading and 5 Trading Tactics That Beat the Market (I'll do a review of these in another blog post once I watch them.)

Some of these trading DVD's are more than half off and some are less than $1! Here are a just few of these specials...

Precision Trading Techniques: Strategies for Combining Price, Volume, Time, and Velocity Retail Price: $99.00 NOW $4.99

Advanced Strategies for Option Trading Success Retail Price: $99.00 NOW $9.95

Proven Candlestick Patterns Retail Price: $99.00 NOW $29.95

Methods to Predict & Profit in Any Market Cycle Retail Price: $64.95 NOW $9.95

Becoming a Disciplined Trader: Techniques for Achieving Peak Trading Performance Retail Price: $64.95 NOW $.99

A 4-Step System for Screening the Markets Retail Price: $99.00 NOW $2.99

Boosting Returns: New Twists to Time-tested Trading Techniques Retail Price: $64.95 NOW $.99

FOREX Trading Using Fibonacci and Elliott Wave Retail Price: $99.00 NOW $49.95

How to Profit with Index Options: 5 Steps to Winning Trades Retail Price: $99.00 NOW $4.99

Candlesticks and Pivot Point Strategies Retail Price: $99.00 NOW $79.95

A Beginners Guide to Short Selling Retail Price: $19.95.00 NOW $.99

This offer ends at the end of this month. Thank you for supporting this website!

Written on 21-08-2009 5:53 pm by Craig

How StockTwits Can Improve Your Trading

Have you seen StockTwits?

This is one of the best trading resources to come along in a very long time. Basically, you can see in real time what other traders and investors are doing. From the website...

StockTwits is an open, community-powered idea and information service for investments. Users can eavesdrop on traders and investors, or contribute to the conversation and build their reputation as savvy market wizards. The service takes financial related data - using Twitter as the content production platform - and structures it by stock, user, reputation, etc.

Here is a screen shot of the home page...

stock twits screenshot

If you go to the home page you can see this window which scrolls in real time (it pulls in the data from Twitter). You can get trading ideas, news information, and links to articles around the web that come out - in real time!

But here is the amazing part. Remember when the market tanked?

S&P StockTwits

Well, I went on StockTwits and I was stunned at the number of traders who were shorting stocks. Yes, that's right. They were shorting stocks after the market had tanked - the exact opposite of what you want to do. So, it's no surprise to me that the majority of traders lose money.

But, to be fair, there were some posts (tweets) where some traders were buying stocks (I bought NLY on that day). Sometimes you can find some very savvy traders that give out good stock ideas for the day - and some that you might have missed. For example, look back up at that screen shot of StockTwits.

That last person to post said that he was "back in CHRW"

Here is a chart of CHRW:

stock twits breakout

So, if you are a breakout trader, then this might be a stock that you would want to put on your watch list.

This website is free and you don't have to sign up for anything. Just go to the StockTwits home page and you will see the "stock twits". It refreshes automatically. And if you have a Twitter account, you can log in with your Twitter username and password and tweet directly within StockTwits.

What do you think? Do you think a website like this could be helpful to your trading?

Written on 24-08-2009 7:09 pm by Craig

5 Trading Tactics and The First Rule of Trading

I finally got a chance to watch two new DVD's by Oliver Velez.

5 Trading Tactics The Beat the Market and...

The First Rule of Trading.

The great thing about buying these DVD's is that you get access to an ebook in PDF format (which is well done) that accompanies each video. So, you don't really have to take notes during the DVD. You can just sit back enjoy it and go over the PDF documents later.

Ok, on to the first video...

5 Trading Tactics That Beat The Market

Oliver Velez 5 Trading Tactics That Beat The Market

Move along.

There is really nothing new here.

This DVD should be called 5 Trading Tactics That Traders Already Know! Seriously, if you have read any of Oliver Velez's books or have watched his other videos, then you will be disappointed by this.

There was one concept in this video that I really found interesting where he talks about the 200 period moving average. He explains that a flat 200 period moving average (in all time frames) is much more significant than a rising or declining 200 period moving average. And, he explains how to trade it.

Him and his traders even have a nickname for this moving average - God!

Bottom line? If you are new to trading stocks then you will love this video because the concepts will be new to you - and your trading will improve as a result. But, if you are a veteran stock trader, then you will want to pass on this one.

The First Rule of Trading

Oliver Velez The First Rule of Trading

This is a very good video.

It's a good video for new traders and veteran traders. In the video, he talks about a trading setup (candlestick pattern) which he calls, The Gift.

The candlestick pattern itself is nothing new. It is just a variation of the rising three methods candlestick pattern which you can find in any candlestick pattern book.

BUT, it's the way he trades this candlestick pattern that is simply brilliant.

He says that this chart pattern is one of his most profitable. And I don't doubt it by the precise entry and exit strategy for this chart pattern. I really like the exit strategy. It is a very simple way of trailing your stops that I have never seen before.

This is a pattern that I will be looking for in the future as it compliments my own personal trading strategy well.

Bottom line? This video is worth the money and I highly recommend it.

I should mention that in both of these videos he has a unique explanation of candlesticks (price). If you have never heard Oliver Velez talk about the "Market's 13 Bars", then you will be in for a treat...

There are only 13 bars that a market can form. They represent the market's alphabet, if you will. Learn these bars and what they mean and you'll be set to trade for life.


Beginners: Learn the Basics

Intermediate: Trading Strategy

Advanced: Swing Trading Tactics