Each dealer has looked for the ‘holy grail’ of indicators…the one which tells you precisely the best way to commerce for pure earnings.
Hopefully, most of you understand no such factor exists.
For years, I attempted to seek out the secrets and techniques of the market.
It seems they have been proper in entrance of my nostril your entire time.
You see, there are solely three items of knowledge any dealer ever wants from a chart:
The connection between these elements is crucial to understanding the best way to determine and commerce setups out of patterns like my Supernova.
Information tales and different catalysts are crucial as properly. Nonetheless, they don’t come from the chart.
Worth, quantity, and time are all we ever get.
And studying the best way to interpret every is crucial.
Whereas I may most likely write a library on the subject, I wish to provide the key factors for every.
These will enhance your possibilities of rapidly figuring out and evaluating entry and exit spots inside a sample.
You Can’t Have One With out The Different
Most folk wish to assume that value is the one factor that issues.
Nonetheless, we all know that shares with low buying and selling quantity usually have extensive spreads that value massive quantities of slippage.
We all know that premarket buying and selling quantity is totally different than the common session. Even the principle session tends to see extra quantity on the open and shut relatively than in the midst of the day.
All of those are pretty apparent.
However let’s take this deeper and take a look at dip buys.
This can be a chart of SIGA Applied sciences Inc. (NASDAQ: SIGA), one of many greatest winners off the Monekypox information.
I drew a few arrows that time to a protracted tail candlestick and the related quantity.
This pullback occurred inside the first hour of buying and selling however was properly off the day’s highs.
Discover the form of the candlestick.
The open is close to the excessive of the candlestick together with the shut. Beneath that may be a lengthy wick.
Take into consideration this as a story.
Sellers got here into the inventory laborious at the start. But, patrons stepped up with sufficient drive to beat these sellers and shut the candlestick again close to the highs.
Now, that might’ve occurred as a result of there weren’t quite a lot of sellers.
Nonetheless, that’s the place quantity gives one other clue.
The amount on that candlestick was the very best out of any that day.
So we all know this was an enormous choice level the place patrons and sellers battled for dominance.
Quantity and value motion of this magnitude present a possible commerce setup if I wish to dip purchase this inventory.
Okay, so what about time?
Take into consideration how and when this occurred.
This wasn’t proper on the open when the buying and selling quantity is sort of all the time larger than the remainder of the day.
It occurred after quantity had already died down.
Examine that to a different chart of SIGA under.
On at the present time, quantity began and stayed excessive all day whereas shares saved shifting larger and better.
The truth is, the pullbacks, though quick, tended to coincide with decrease quantity.
So it wasn’t a lot of a shock when quantity dropped the next day that value slid decrease.
Understanding Time
Worth and quantity are usually straightforward for people to wrap their heads round.
Time is a bit tougher.
So let me clarify it utilizing a chart of FaZe Holdings Inc. (NASDAQ: FAZE).
Again on the twenty second, shares jumped within the put up market, with the inventory buying and selling in a variety on heavy quantity the next day.
For the following a number of days, value traded on elevated quantity in a decent vary.
If a inventory can maintain the upper finish of its buying and selling vary after an enormous transfer, likelihood is it can make one other transfer larger.
And the longer it takes for this to occur, the extra doubtless it’s quick positions will construct up and create the circumstances for an epic squeeze.
Ultimate Ideas
Subsequent time you’re about to enter a commerce, attempt to construct a narrative in your thoughts like I did right here.
Ask your self who’s in management and the way lengthy they’ve been in management.
These solutions will assist you to determine whether or not the setup is prone to work or fail.
–Tim
