VOLUME

Category: Finance.

I have the unique opportunity to teach Traders with a wide range of knowledge.

There are some" laws of life" that seem unchangeable. Some individuals are just beginning, while others have been around the market for 20+ years. For example, I know that some people will earn more than me in this market and, others will never, unfortunately have success in their trading efforts. It is comforting to know what makes the difference between the winners and the non- winners( I choose not to use the" L" word) . It s sad to think that some people will not see their aspirations for financial success materialize. If I know that some people will never have success trading, why do I still teach them? The answer is simple, I have no idea who will be the big winners and who will end up a frustrated shadow- until it happens.

Should I not be honest and tell some people to save their money because they have no chance? However, I do know what makes the difference between winning and not when it comes to successful trading behavior. What is the secret? I also know what it takes for individuals to transform from frustrated investors into top earning professionals. Is it really that simple? What do I have to know to finally start being successful?

Can anyone make it work? Who do I have to bribe so I can borrow the Magical Stock Market Genie? It takes patience, the correct information, self control, and practicing until perfect. Sorry to be the bearer of sad news, the answer is not as easy as making a wish and waiting for money to fall out of the heavens. Being a consistently successful trader is a lot like climbing Mt McKinley in Alaska. McKinley is the highest mountain in the entire North American Continent, 000 feet from, rising 16 ground to highest peak.

Sure mountain climbing is difficult, and Mt. It may seem like an impossible task, but climbing that amazing mountain is actually considered, by the professionals, "easy" when compared to other record setting structures. Why am I comparing investing to mountain climbing? The climb might be considered" easy" (by experienced climbers) yet during the average season if 1, 000 people make the attempt statistics indicate that 500 will succeed, 497 will be disappointed and 3 will die. Because successfully attacking the mountain and coming back alive from the trading floor, requires exactly the same basic elements. You can increase your odds of success even more if you associate with other experienced climbers and you have a team member that has already made it to the top. You must have the right knowledge, the correct tools, advance preparation and equipment, and plenty of perfect practice.

While on the mountain( in a trade) you need to be ready for unexpected changes in your environment. Even more important, you must be able to admit defeat quickly, so that you can live to climb another day, with as much of your equipment as possible. You must be mentally ready for the challenge, you need to develop the right instincts and you need to have total self control. You do not need to be super human and you are not required to walk on water, or have a, read minds perfect sense of direction. "OK, what will it take for ME to be one of those people that make to the top? " Are you sure that you are ready for the answer? I warn you, the answer is not going to be what you want to hear! I mean, do you want, really to know the truth? Here goes, so if you choose to read on, you do so at your own peril.

If you read on, you are agreeing to leave the world of the confused and to enter the secret chamber of the few who know the magic powers of applied knowledge. I warn you once you have the answer, there will be no turning back. What is the real secret? That s your BIG secret? When you become a master of the basics you can conquer the top of anything- mountain or the stock market. "That s it? I don t get it. Didn t I tell you that you might not want to hear the truth?

Know the basics, give me a break, there has got to be something more, what did you leave out? " I warned you! Many years ago, when Miles and I were beginning our trading education we were privileged to have access to a few of the best traders in the world. Each person shared personal preferences and valuable suggestions but all of them were in agreement that making big money in the market is a process of patience, and focus on, self control basic rules. We asked them what we would have to learn or do to reach our dreams. They also said that we should choose one or two investment techniques, and then practice until we were masters of those techniques. Yet, being able to consistently apply the knowledge of the basics is what makes the difference between winning big money or not. We were also told to pick a handful of companies and get to know them so well that we knew" the heartbeat of the stock. " I am sorry if my answer was a disappointment to you, becoming a master of the basics is not glorious and it seems too simple.

It seems so easy that most people keep searching for some hidden secret or trick that will earn millions of dollars, and the answer is right in front of them all the time. Teaching classes lately I have been astonished at how many traders, who consider themselves seasoned traders, are not fine tuned on basic skills like reading charts and identifying Support& Resistance. What I think is that people want to take a short cut so they can bypass the struggle, they do not want to practice, they want to get to earning the big money right away( without any effort) . These" traders" act like they know the basics- but when I take a few minutes to review some important points with them, such as how to pick support and resistance or even using moving averages they don t know how to properly do so. I believe that we get stagnant in our trading skills over time and we just forget how to use the basic and simple things that worked when we first started. It amazes me how they have traded so long( many with 5, 10, 15 years experience) without mastering this essential skill. We get excited about more advanced methods and in the excitement we overlook the things that are so simple and always critical like support and resistance.

With our excitement on overdrive we run with this new technique without taking the time to make sure we have the whole process learned. When we discover a new technique we jump too fast to trade using that new, not fully learned concept. I know, it is really, for me easy to assume I know something new, I jump to the using step immediately but I have not learned the concept in sufficient depth. It is so easy to slip into new techniques that it is very important to, at least once a year, review the basics of charting. I end up forgetting the" practice perfectly before using real money" step, with terrible consequences. I remember one time when I had been trading for a few years, and it was time to do my review.

I find that identifying support and resistance enhanced with candlesticks is my most important and number one consideration before trading any stock. After taking a review class on technical analysis( which only means" how to read the charts" they use big words to scare us away) it hit me like a rock that I had completely forgotten to use support and resistance and I was only trading from other technical indicators. It s a basic concept that is the foundation for successful trading. There is a great review on THE DEDICATED TRADER, and we have a great class taught by Markay Latimer that I am going to take in Toronto this year, for my annual review. I want to encourage you to do a solid review of the basics. Markay is an awesome trader and technicals are her big thing. What follows is a review of only a few of the basics.

I don t have time to share with you the details of these sources but if you are interested just call 1- 800- 290- 7020 for details, be sure to mention this article so you can get the best price. Because space is small, I will have to simplify and be brief. Most of the time, I look for support and resistance by putting my one day timeframe chart into a line chart. FINDING SUPPORT AND RESISTANCE. The line chart shows the market closing price, which is generally assumed to be the most accurate for the day, because amateurs open the market with market orders and professionals are considered to close the market resulting in prices that are more reasonable. When I begin to draw my lines, if there are less than three exact hits I delete the line and try again.

After I put my chart into a line chart setting, I am searching for possible trends- up, down or sideways. I try horizontal and diagonal lines. Three or more hits mean investors will remember that price and react to it causing a stock to stall there and perhaps change directions. I need three or more hits for it to be significant enough of a line to call it support or resistance. As a more advanced look, if I don t seem to find a perfect line that gets three hits I will then put my chart into candlestick mode( I am not fond of bar charts) and then I will look to see if there are any wicks( also known as shadows or tails) that touch a line enough times to make it an important stopping point. I prefer the line chart, but sometimes you need to revert to candlesticks to figure it out.

If I get three or more hits then it is good enough to call it" soft" support or resistance. Both are fine. VOLUME. Remember anything less than three hits is not strong enough to hold the price level. Volume is important. I prefer to look at average daily volume, but intraday we can get a feel for what is going to happen, on the short term. It shows the amount of interest in a stock or market.

I also set my real time alerts to monitor unusual increases in stock volume. This alert notifies me that something is up. I ll get an alert if the share trading volume reaches two times the average volume. It is not the day traders or the little guys that cause large movements in volume, but the institutional trading. I look at volume in two ways: I want to trade stock with average daily volume of 1 million shares, so that enough people are trading the stock for it to move in predictable patterns. When the Big Guy s buy or sell it causes volumes to jump, watching this activity can give us an edge. Once you are advanced, and you have made good money in today s market you might drop this number down to 500, be careful smaller, 000 shares volumes means unexpected volatility.

To figure this out I look at the volume. I want to know if a recent move of the stock is sustainable or not. If the volume is weak for that stock, much lower than average, then the move probably will not be sustained and I anticipate it failing that direction. Finally, if there is a jump in volume, there could be a change of direction soon. If it is higher than average volume then the direction is very sustainable and we can go with the flow. Volume is considered a" Leading Indicator" meaning that increases or decrease of volume occurs before an event( like a change of direction) . "W" AND" M" PATTERNS.

I was talking to my brother the other day, who is very intelligent, he was a broker in the 80 s and is now starting to trade on his own, using techniques that I taught him. This might seem silly, it is NOT, but believe me! We were discussing a trade he had done and I asked him why he did not get out when the stock showed an" M" pattern. Based on this I want to review it in detail. He told me that he had heard me mention that pattern but he had no idea what I was talking about so he just ignored the information. Unfortunately, I have run out of space so you will have to wait until the next newsletter for this" basically wonderful" article to continue.

I am sorry to leave you hanging, but this article is a real" cliff hanger" . I will also discuss Trends, Entrance& Exits, and more, pulling the plug. Happy Trading, Darlene with BetterTrades