How to Properly Catch a Falling Knife

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The Magic of Moving Average Crossovers

By now, you’re well aware of how to find trends using simple moving averages, such as the 50- and 200-day moving averages.   But you should also know how to potentially spot when a trend could stop dead in its tracks, or birth a new trend.

All we have to do is wait for a crossover to do so.

For example, we can spot a bullish “golden cross” when the short-term moving average, such as the 50-day crosses above the longer-term average, such as the 200-day.  When this happens, we’ll typically see a move higher in a stock or an index.

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Using Bollinger Bands and Keltner Channels in Your Trading

Most of us are familiar with what happens when you pull a rubber band too far.

It has a tendency to snap back. That same idea applies to stocks, too. For example, if a stock sells off too much too fast, it has a tendency to snap back, or revert to mean.

Or, if a stock runs too high, too fast, it’ll often snap back as well.

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How to Draw Your Trend Lines

The trend is the most important concept in technical analysis.

Its strength or weakness can dictate the overall direction of your favorite stock or index. Potential uptrends can be characterized by a series of higher highs. Potential downtrends can be characterized by lower lows.

Look at the NASDAQ Biotech ETF (IBB), for example between 2013 and mid-2015.

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Hammers: Two of the Most Powerful Candlestick Patterns

It’s not difficult to understand why candlesticks have become so popular.

Unlike your typical bar or line chart, candlestick charts tell us four essential things in a given day – the open, high, low and close. More importantly, they can tell us how strong or weak the bulls or bears are at a point in time.

For example, if I spot a doji cross at top of trend, it’s an indication of indecision among the bulls and bears. It can also tell technicians – based on historical observations – if a trend is likely to reverse in the opposite direction. 

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Use These Indicators to Simplify Your Trading

Keep it Simple, Stupid!

Coined by the U.S. Navy in 1960, “Keep it Simple, Stupid” is the idea that most systems work best if they are kept simple rather than complicated.

Therefore, simplicity is key.

That’s especially true if you truly want to make the most money.

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How to Use Technical Analysis for up to 85% Success

There is no such thing as the “Holy Grail” of investing.

It doesn’t exist. If it did, we’d all be filthy rich with our own island. 

But there are ways to give yourself an edge, especially if you know how to exploit herd mentality. In August 2017, shares of Allstate (ALL) took a nasty hit as the fear of Hurricanes Irma and Harvey took their toll on most, if not all insurance-related stocks.

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The Most Important Concept in Technical Analysis

The trend is the most important concept in technical analysis.

Its strength or weakness can dictate the overall direction of your favorite stock or index.  Potential uptrends can be characterized by a series of higher highs.  Potential downtrends can be characterized by lower lows.

Look at the NASDAQ Biotech ETF (IBB), for example.

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How the Relative Strength Indicator Can Give You an Edge

Traders are often told to buy excessive fear or greed.

Unfortunately, many of those traders aren’t aware of when to pull the trigger, or realize when fear or greed have gotten way out of control. Then, when they finally do decide to make the trade, the stock has already begun to pivot.

And more often than not, they miss the profit opportunity.

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Gap Trading Basics

All of a sudden, there’s a gap in the chart of your favorite stock.

Surprise news, earnings, something unexpected caused a bout of extreme optimism or pessimism that resulted in the move.

 

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What Flags and Pennants are Essential

Trying to figure out why traders are selling or buying can be tough.

But once you begin to understand charting, you’re literally looking at a consolidated view of the very forces of supply and demand – the two key forces that drive stocks. 

Understand that, and you’re one step ahead of the herd.

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Trading Playbook: 13 Questions to Always Ask

Success is not always a guarantee.  But if you have a plan in place, you increase your odds significantly.

You see it’s not about having the “perfect” strategy. 

It’s about the rule you abide by with each trade.  Any one can trade a stock.  But it’s takes a disciplined trader to trade that stock well.  One of the biggest issues facing all walks of traders is a severe lack of discipline and structure in stock buying habits. 

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Two of the Greatest Momentum Oscillators

Fear and greed are the greatest tools a trader can use.

If I spot fear raging out of control in a stock, I want to know exactly when that fear is likely to dissipate. Or, if I find a trade where buyers are tripping over one another with greed, I want to be aware of it.  That’s because if I can spot where either is out of control, the easier it is for me to make money. 

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