Repainting indicators can be very harmful if not used correctly. They are especially dangerous to systematic traders because a repainting indicator typically produces backtest results that are too good to be true. Repainting indicators are particularly pernicious when dealing with complicated formulas and strategies. This is because it can be hard to tell whether an […]
Technical Analysis
3 Simple Things To Improve Your Trading
The best traders follow consistent strategies. Many use the same signals repeatedly to show them when to enter and exit a trade. In other words, they place orders on a trading system that they have developed through trial-and-error. In my experience, this is true for all traders. Many old school traders are not even aware […]
How To Trade A Price Rejection Trading Strategy
A price rejection trading strategy aims to identify levels at which a price trend – either upward or downwards – will reverse as a result of the market’s reluctance to move above or below that level. Price rejection strategies work for both long and short positions depending on the previous directional pattern. For uptrends, a […]
Which Trailing Stop Is The Best?
A trailing stop is a stop loss order that moves with the stock price. As the stock price rises, the stop moves higher too, locking in profit and reducing the risk of a loss. For example, suppose you buy Apple at $100 and enter a $20 trailing stop. When Apple moves to $120, your stop […]
Analysis Of Entry Signals
I have just published a new class called Analysis Of Entry Signals. This is a 1-hour class where I take 40 different trading signals and analyse their profit potential on US stocks over different time horizons, spanning 2-days to two years. The idea behind this class is to analyse a large amount of historical data […]
How To Trade Oversold Stocks (Waterfall Pattern)
In order to make a profit in stocks you need to sell at a higher price than you purchased. Because of this, many traders look for stocks that have dropped to extremely oversold levels in the hope that they will bounce back from their low levels. One such pattern traders look for is known as […]
20 Technical Analysis Patterns You Need To Know
Technical analysis is a highly debated subject because academics say that markets are too efficient to be predicted by simple patterns or indicators on a chart. For some, the whole concept of technical analysis is a fool’s errand. However, this viewpoint is not completely accurate. The truth is that technical analysis is such a broad […]
Should You Buy 52-Week Low Stocks?
Whatever your investing style it’s useful to have a way to whittle down the thousands of available stocks to a more manageable number. Over the years, I’ve listened to many investors explain how they do it. Often, the first step is to look at the Wall Street Journal for stocks near 52-week lows or 52-week […]
Testing A Reader’s RSI Trading Strategy
A reader asked if I could backtest a trading strategy based on the RSI(2) technical indicator. Most RSI strategies trade mean reversion setups, however, this is actually a trend following strategy. The idea is to follow trends and use an RSI(2) pullback to get a better price entry. We wait for the RSI(2) to turn back […]
How To Trade The Controversial Double Top Pattern
The double top is a bearish chart pattern consisting of two consecutive price peaks that leads to a bearish reversal. For years, traders have claimed that the double top pattern is a high probability short setup. This is because a double top signifies that bulls are having trouble pushing the price past the prior high. […]
3 Simple Ways To Trade Divergence
A reader asked about trading divergence so I thought I would look into it. Searching the web I found many articles that claim divergence trading is an effective way to trade stocks. However, there is very little empirical evidence provided. In this article we test several different divergence strategies and we compare our results to […]
Market Meanness Index For Amibroker
The Market Meanness Index is a technical indicator developed by JCL from the Financial Hacker website. In this article we will describe what the indicator is designed to do and provide some code for Amibroker users. MMI is a statistical algorithm based on the median value of a price series. It’s purpose is to help […]
Using This Sector Filter Improves Net Profit By 50%
Old school trading wisdom says you should not only buy the strongest stocks but the strongest stocks in the strongest sectors. In this article, I discuss a simple breakout system. Then I introduce a basic sector filter which improves our net profit by around 50%. Full Amibroker code is also provided.
Testing The Bullish Hikkake Pattern On US Stocks
The Hikkake pattern is a simple price action or candlestick pattern that is used to find market turning points. The pattern is essentially an inside day with a fake breakout and is originally credited to Daniel Chesler CMT.
Should You Trade The Money Flow And Pinbar Strategy?
The Money Flow Index indicator (MFI) is an oscillator that uses price and volume to measure momentum. It’s also known as a volume-weighted RSI and can be used in a similar way. In this article I will be testing a strategy that I found on a popular trading website.
10 Best Swing Trading Books For All Levels
Swing trading is a good option for investors who may not have the temperament or time to engage in day trading. Having success in this field requires you to take the time to learn about the various trading strategies and processes for short-term trading. Fortunately, many successful investors that have come before you have made […]
