Description

My basic trading philosophy can be summed up by one simple quote:

"Trade the ticker, not the company" - Nate Michaud


Saturday, February 8, 2014

Question: "What charts do you use when trading?"

There are really only two charts I pay close attention to while I'm trading. The first chart that I'll pull up when looking at a ticker for the first time is a daily chart. I typically pull up a daily chart for the past year, but I tend to care more about the recent history and when the volume really started to pick up on the chart. Once I've seen the daily chart and have an idea of what the big picture looks like, I then look at a one-minute chart for the current trading day and make my decisions based off that (all the while remembering where the daily chart is). Let me use HEMP the day I shorted as an example:


Going into the day, as always, the first thing I looked at was the daily chart. Yes, HEMP was only trading at $0.30 entering the day, but that doesn't mean it was "cheap." The FIRST thing I notice when I pull up the chart is the volume. The volume was MUCH heavier over the past month, especially in the last few days. The next thing I noticed is that we clearly have a parabolic daily chart. In three days the stock had gone from $0.10 to a high of $0.34. Another detail I noticed is that during this three-day parabolic, the stock had never gone red on the day, meaning the price never dipped below the previous day's closing price. So, as the trading day began, I switched over to a one minute chart but remembered the "big picture" of where the daily chart was.


The line drawn above on the one-minute chart reflects the previous closing price. Entering Thursday morning, HEMP did gap up a little bit, from $0.30 to $0.3125. When the morning spike failed, however, I started into a short sell position. The stock could not break past $0.32 in the first few minutes, and I knew that even if it did, there was still resistance at the $0.34 high from the previous day. Then the price began to drop. When HEMP broke below that $0.30 mark, I added to my short sale position. I did this because it was the first time in four days that HEMP had gone "red" on the day, which made a panic likely since, "big picture," the daily chart was so overextended. While this doesn't work EVERY time, it's a high-odds trading setup and as you can see on the chart below, it worked out great in this case as I covered into the morning panic:


This is just one example of how I will use daily charts and one-minute charts in combination. Of course, the daily setup could be completely different, and that would change my plan and my bias when trading the intraday chart. Hopefully this gives you an idea of how I use charts to my advantage. As always, please email me if you have any further questions!

31 comments:

  1. Wow, very well explained. Your results are very much deserved too for this trade. Appreciate the explanation Tim.

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  2. Great article, Tim! Very easy to understand! Thanks a lot!!
    Keep 'em coming!

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  3. Very insightful. I was in the TIMalert chatroom watching this trade go down live, it was awesome. Congrats on the trade and thanks for the post.

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  4. Tim, what other technical analysis do you use besides S/R? Do you use any indicators?

    Thank you!

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    Replies
    1. I don't use anything besides basic support and resistance! I find no need to complicate it more than that

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  5. Tim, what charting software/website do u use?

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  6. Tim your teaching is so easy to understand. You have a great way of not complicating things. I know many will become much better traders from this blog.

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  7. Great explanation but the question im wondering is what brokerage would allow you to short this stock? it was at 30 cents most brokerage won't let you short anything under 2.

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    1. This was shortable at Centerpoint, Suretrader, and Interactive Brokers. Review my brokers post for more info, thanks!

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    2. O ok, well I know you can short stocks under 2 at Suretrader but ive read terrible reviews from them so never opened an account. Thanks for the quick responses

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    3. Just curious tim, what do u think of only having sure trader as your only source. I'm just starting and have a small budget

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    4. I think it can work, you probably just need to gear your trading more towards nasdaqs or shorting overextended OTCs though in my opinion. Trying to get in promotions early with Suretrader is tough

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    5. "Trying to get in promotions early with Suretrader is tough" Why is that?

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    6. Because Suretrader only offers 2 OTC routes and executions suck

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  8. Hi Tim,

    How do you actually input your orders to enter & exit where you want? Markets, limits, stops? Thank you.

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    Replies
    1. I use limit orders mostly, market orders and stop orders are dangerous because you have no control over what price you get executed at

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  9. Tim,

    Thanks for sharing this awesome post, it answer a lot of my questions regarding reading charts.

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  10. Love the site Tim very helpful. I wanted to know if you could do a blog about your scanner setup and the variables in the scanner.

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    1. That already exists actually! Covered in this post: http://tradetheticker.blogspot.com/2014/02/watchlist-for-february-24-2014.html

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  11. Thanks for the post Tim!

    I have some questions regarding use of limit orders, which I do not fully understand:

    How do you determine your limit execution price for buy and sell orders?
    When buying, do you set the limit price below the current market price?
    When selling do you set the limit price above current market price, to try to capture additional gain?

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  12. Tim, sorry for a random question in regard to this post (I checked the site to see if there was a post I missed which would answer my question, forgive me if I missed it). All I have traded so far is micro cap NASDAQ stocks, how do you manage your entrance/exit price on these penny stocks, since the prices are moving with such speed? Thanks

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    Replies
    1. I have hotkeys set up so I only have to click a button, rather than take the time to fill in every field in my order box

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    2. (You can do that!?!?) How is that done without filling in fields specifying what type of order, share amounts, and price point?

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  13. This is one of the BEST blogs on trading I have encountered as a trading beginner. Simply amazing Tim. Please, keep up the education and training on this blog. Easy to understand and follow for sure. Thanks again Tim for giving back to your community!

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  14. Tim, I noticed that the price was lowered on your 'Trading Tickers' DVD, (i.e. from $1797.00 to $997). Any change you could offer it at a lower price for us beginners just starting out, say down to $500? I could afford it if it was lowered as a Christmas promotion. Let us all know.

    Regards

    BT

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