Before you jump in, you need to know the basics that can help ensure your success. Trend Trading For Dummies includes trading strategies that you can use as-is, or customize to suit your needs. Thorough preparation is the key to any good trading plan, and it's no different with trend trading. Trend Trading For Dummies allows you to trade using every angle, and will get you out of or into the market in a flash.
Follow the trend! This comprehensive guide shows you how to trade various markets, read charts and time intervals, develop strategies, and put your plans into action to take your trading to the next level! Barry Burns is the founder of TopDogTrading. He was also the lead moderator for the FuturesTalk. What's Barry's strategy for trade management? A percentage trailing stop He could have written the meat of the book in two chapters. I coded the system using multiple data streams and all 5 indicators into easylanguage and it's not profitable.
Book added to my understanding By Swing trader I did take Topdog courses, the book added to my understanding. I would suggest that before the next printing you review the charts. Some notes on charts say the opposite of what is meant. One chart did not show all that was being explained.
Because I took the course I understood what was happening, but for somebody who has not this could be confusing. A taster but nothing more By Amazon Customer I own a number of Barry's courses and think they are a great resource for learning how to make a consistent profit trading the financial markets.
This book takes a very superficial look at Barry's approach, methods and system for trend trading. The book suffers from 'a little knowledge is a dangerous thing'. One really needs a complete understanding of his approach and specific methods to make consistent profits.
As a taster it's fine, however you get what you pay for. So if you're serious about wanting to trade profitably then go and buy his full course.
It's a worthwhile investment. Is an independent publisher and comparison service, not an investment advisor. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Our partners cannot pay us to guarantee favorable reviews of their products or services. Table of Contents. The stock market isn't like your grocery store: To buy and sell stocks, you must shop through a licensed brokerage, which makes trades on your behalf.
For example;. This is crucial for you to understand because each market and Forex pair will have hugely varying spreads. In this post we go through the windows ten most commonly used and misunderstood trading slang terms and what exactly they mean. The S P then posted a compound annual growth rate of to including dividends. But this isnt your typical market, and you cant show up and pick your shares off a shelf the way you select produce at the grocery store.
Adults, among whom over were invested in the stock market during at least one of the past five financial downturns, in June One standard lot refers to , The goal of stock traders is to capitalize on short-term market events to sell stocks for a profit, or buy stocks at a low.
Our partners compensate. Interested in individual stocks? Information published on this website and in our external communications is factual and for information purposes only. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Investors use indexes to benchmark the performance of their own portfolios and, in some cases, to inform their stock trading decisions. Investors who trade stocks do extensive research, often devoting hours a day to following the market.
How can you gather that information? Are things improving? How can you follow this information? You get a couple of ideas in the following sections. For a stock to move up in price, it needs the large institutional investors to start investing in the stock. If enough large institutional investors are trying to buy up the stock, this action pushes the price higher. As the price goes higher, most investors are happy to keep owning the stock because they are making money.
The key for tracking moves by institutional investors is trading volume. In Chapter 3, we talk about how to display volume on charts. When these investors are making a big move in a stock, whether buying or selling, the volume of trades goes up. If they are selling, you will likely see a downward trend in stock price. If they are buying, you will likely see an upward trend in stock price.
You find discussions about volume throughout this book. When a stock sale takes place, a buyer is buying the shares from a seller. When more investors are trying to buy shares than sell shares over a short period, this pushes the price up.
But the number of people with the desire to buy can be higher than the number of people with the desire to sell. The way that comes into balance is through the buyer raising his bid to buy the shares. The imbalance is where you see the price forced to trade higher, so the seller is motivated to let the shares be sold to a buyer who is willing to pay more.
Understanding that stocks trading higher in price are probably moving higher because there are more buyers than sellers is an important piece of knowledge. You have a way to see that actually happening. Using a stock chart can give you this information. A stock price moving up is the sum of all known information about the stock at any given time by investors. Throughout this book, we show you how to take advantage of the history you can see in charts to help you make better buying and selling decisions.
Is the price at the lowest price of the year? Is the price wobbling within a range and not really doing anything significant? Throughout this book, we show you how to use various types of charts and their tools to help you better understand market trends and make better trading and investing decisions. Using charts not only helps keep your emotions in check as you invest but also helps you track emotions and opinions that investors have about particular stocks.
Figure shows a stock chart using a price bar to represent the trading range for a day see Chapter 5 for an introduction to bar charts. The top of the bar represents the high and the bottom of the bar represents the low. The little tab on the left is where the price started in the morning, and the little tab on the right is where the price closed at the end of trading.
It had pushed up against this level a few times before and fallen back. You can also see that the volume depicted in the bottom panel was around 5 million shares a day as a rough average for most of August. All of a sudden, the volume accelerated, and three trading days had a total volume of roughly 22 million, or more than 7 million shares a day. Charting software fills the chart using the previous highs and previous lows. To do this, it adjusts the scale. As the stock price continues higher, the software adjusts the scale to.
By using charts, you can see the broad picture of all the investors, and the price action shows you that they were buying more stock as the price made new highs. After you have a frame of reference for the price on the right-hand side of the chart, you can look back through the history to see other pieces of information. When and how did the stock bottom out? What was the size of the trading range for the year? Are the price bars changing in size?
You can see that the stock has been moving higher on a jagged path since the lowest price in November Charts based on a particular index help you visualize how a group of stocks are affected by price changes in the market.
Figure shows a daily stock chart for one particular stock. Figure shows the daily chart for a group of 30 stocks added together to represent an average.
Making up this index are some banks; brokers; insurance, computer hardware, computer software, and energy companies; and others. The companies in the index are chosen. By keeping track of the general price direction for some of the largest stocks in the United States, you can determine whether the stock market is moving higher or lower. The chart of the index shows that the Dow has been rising quickly and moving from the bottom left to the top right.
The last price on the right is near all-time highs. The chart of Cabot Oil and Gas in Figure was not nearly as great-looking for the last year, but the recent price action is improving. As the economy rolls along, some sectors improve and others fall behind. Then management in those companies tries to get more efficient to improve the.
This cycle continues every day but takes time to play out. If all the companies are struggling to make higher profits, the index reflects this weakness in investor opinion. By keeping track of the index, you get a picture for the broader group of stocks. The following sections provide just a few examples of stock indexes you can follow. There are indexes for the entire world.
There are indexes for each country and for each geographic region. There are commodity indexes, currency indexes, and bond indexes as well. There are. You can put together a chart of your favorite indexes based on the types of stocks in which you choose to invest.
A commodity is any basic good that can be sold on the market, such as energy products like oil and gas and farm products like wheat and corn. When you see the long-term price chart of 19 different commodities shown in Figure , what does that chart tell you very quickly?
The scale across the bottom is measured in years from to The price is only the end-of-month price, which communicates what you want to know without the daily trading details. Why are the commodities that the world has been built on at the lowest prices in 45 years? In one picture, the chart has probably altered your perception of what is going on in the world. Without doing thousands of hours of research into each commodity, you can see a significant change in the world based on investor attitudes to those asset classes.
This is really the best anchor point from which to view the U. The contrast between the four charts in this chapter gives you a glimpse of the value of using charts to help you make trading or investing decisions. On each chart, there are trends where you see the price move in a general direction for a period of time. Trends can last a few days, weeks, or months.
Understanding these trends and the direction in which the market is moving helps reduce your anxiety about trading and minimize the emotional roller coaster of investing. When you feel anxious about a trade, take the time to review your charts and determine whether the change you see in the trend differs from your original plan for trading the stock. Then you can make a less emotional decision about whether to buy, hold, or sell the stock. On Figure , a trend line has been drawn in to highlight the uptrend.
Making money using charts usually involves defining a new uptrend and recognizing the end of the trend. See Chapter 9 for more about uptrends and downtrends.
In this chapter we show you how to use the flexibility of charting to build a useable display using three key. Chart attributes give you the primary choices for how you want to set up your chart. Chart attributes define things like the size and shape, the type of price display and color, and the. Because there are different price display types like candlesticks, bars, and lines, each chart has different display requirements and choices.
To show you how this works, we take you through the steps of seting up a chart in this section. Some important decisions you have to make are the amount of data to display and how you want to display that data. These choices include the time period for the chart, the number of periods you want to display, the setup for the bars, and the type of chart.
You also choose the colors and other appearance attributes. The first group of settings includes the time period for each bar, the dates you would like to see, and the spacing. When it comes to charts, the most popular time period for investors and swing traders is daily. This means that price information will be for one day. You can see how to set the periods in Figure Common time period choices include. For this book, we focus on daily charts. In Chapter 8, we discuss when other time periods should be considered.
Range displays how many periods you want to display, which is an important choice depending on the information you seek. Stock charts show quickly, without a lot of description, where price has been for a particular period of time. Traders or investors choose a time frame based on the type of decisions they want to make.
For example:. Short-term traders select a three-month time frame most often, because they plan to exit in the same day or within a few days. The three-month time frame gives them enough information to see the trend visually, but not too much information that can make it difficult to see an exit point.
These charts can be intraday to describe what is happening for the day. Using a chart with five to ten days broken into one-hour candles can show a stock starting to improve or break down.
Investors are less concerned with intraday movements and tend to select a one-year chart so they can catch longer trends. Because they will likely hold a stock for months or years, investors want to see how the stock has done over many years rather than just a few months.
When they are trying to pick an entry or exit point, long-term investors will look to monthly charts. Institutional investors tend to use year charts with monthly time frames, but they will look at many different time frames as they make decisions for their portfolios. The range selection has a relationship with the individual time period. Chart users will want to pair enough data to see the trend that gives them the ability to see the most recent information clearly.
Set the range to Fill the Chart, so the software will calculate settings using three components. The software uses the width of each daily price bar, the space between the bars gap , and the extra bars setting to pick the number of days to display. In Figure , the width of each bar is 5, and the space between the bars the gap is 1. Now take a look at the next area of chart attributes.
Here you set the type, size, and color of price information see Figure Type refers to the type of display for the price information. Common display types are as follows we discuss each type of chart and how best to use it in the chapters indicated :.
With the huge variety of display surfaces, individuals will want to optimize the chart to fit on the display they have. For example, for mobile phones, smaller charts are better. It makes sense to have specific lists of charts set up to browse on the various devices you use. You can set up custom settings for each of your devices to improve the percentage of the screen that your charts cover.
In Figure , the size of is typical for a laptop. Background color is the first critical choice. This parameter personalizes the chart and allows you to control the overall mood of the display. Using black or dark backgrounds for a change from traditional white space on presentation charts can grab attention. For printing your charts, white backgrounds are best. Using white with gridlines helps for printing, but various color backdrops can help make your chart your own.
Lightly shaded backgrounds can improve the attractiveness of the chart while still providing uniqueness. Accessibility options on the computer are very important, and many mainstream users find that some accessibility settings help them. The same is true in charting software. Depending on the quality of your vision, certain themes for the charts may be softer on the eyes.
If you have specific vision issues, we recommend trying different backgrounds from the drop-down menu. For example, people with light sensitivity may want to use dark backgrounds, while people who need a lot of brightness on the charts may choose white or light colors for the background.
You can also enhance the display choices of the data in front of the background to make the information stand out. When you change the background, it is very common to alter the price display so the two parts complement each other.
You may find the wide range of drop-down menus for setting colors daunting, so initially use the default settings to get you started as shown in Figure As you become more familiar with charting and your personal preferences, you can start playing with the colors of the price. Figure shows blue for the up color and orange for the down color.
Opacity allows you to darken or lighten the price bars. A setting of 1. An opacity of 0. The opacity tool is very nice for using area charts that you commonly see on TV. The opacity options are Auto, 0. Note: This feature is available only for members.
Grid lines are easy to see on the screen. The grid setting allows you to adjust the look of the grid lines as well as the darkness of the lines. Your options are. This area controls how much information is shown in the legend. You can see the legend choices at the far right after the grid choices.
The legend information is the amount of information about the stock s in the chart and is shown at the top left of the chart. Here are the options:. Default: Includes overlays and indicator names this setting is shown in Figure Verbose: Spells out the company name instead of the ticker symbol. Volume, which measures the number of stock trades in a day, tends to be a supportive indicator. High volume at certain times can be critical for helping with price discovery. How volume is displayed is unique and not the same as other charting information.
Volume can be toggled on or off by using the volume drop-down menu shown in Figure on the left side of the check-mark toggles. The options are. Overlay: The volume is displayed inside the price panel. Separate: The volume is displayed below the price panel. In Figure , the volume is set in the overlay position.
If price is in the bottom corner of the chart, seeing the price or the volume can be problematic because they overlap. Using the drop-down menu to choose Separate moves the volume bars below the price panel into a separate display.
Eight toggles are listed across the bottom of the chart, as shown in Figure Log Scale: Uses a percentage grid for long time periods where the price has moved substantially. Color Volume: Shades the up days different from the down days. Smoothed Lines: Makes the lines on line charts look smoother. Y-Axis Labels: Adds the current price label onto the vertical axis on the far-right edge of the chart. Zoom Thumbnail: Adds the box on the right with the last 18 price bars. Setting Overlays.
Overlays are display formats you add to a stock chart that help you understand price movement. You build overlays by clicking in the Overlays area below a chart. The charting software automatically gives typical parameters. We help you discover how to apply these overlays for making stock choices throughout this book.
Moving averages: Helps you more easily spot a trend by smoothing out price action based on past prices. Horizontal line: Enables you to more easily see the top and bottom of a trend Price channels: Helps you see the highest high and the lowest low on a chart Bollinger Bands: Shows the upper and lower limits of normal price movements. Keltner channels: Shows the upper and lower limits for price movements based on an average of prices.
Moving average envelopes: Forms a channel using the simple moving averages Events: Marks important events such as dividends and stock splits. To give you an example of a common overlay, Figure shows a simple moving average envelope on this chart of Apple Inc. For two stocks on the same panel, you use the Indicators drop-down menu with a different display option see the next section for more on indicators. The Reorder option allows you to indicate the order for the various overlays you choose.
Style lets you pick one of the following:. Opacity options are the same as those in the Chart Attributes area. Note: These features are available only to members. Indicators help you see price movement. These options are based on significant research done over the years by some very smart technicians to create indicators that help analyze price. Most of the indicators are derived from price, or price and volume.
We help you figure out how to apply the indicators for making stock choices throughout this book. This feature expands for members to set additional display features. Figure shows it expanded. Two indicators need specific discussion see Figure to see the settings for these indicators :.
Using the volume indicator setting rather than the volume setting under Chart Attributes allows you to calculate unique things like a moving average of volume. Because volume offers clues in. The price indicator is useful when you want to display two stock prices on the same chart. The scale for the indicator will be on the left. Candlestick charts provide users a graphic way to display price movement throughout the day on a daily chart.
This type of display first became popular in Japan and today is one of the most. In this chapter, we break down the parts and colors of a candlestick chart, explain how to create one, and show you how to use one to make investing decisions.
Each person has a different way of thinking about the market, which means different displays can be suited to different types of investors. Many longer-term investors find candlesticks too complex and would like to use something less detailed. You may find bar charts see Chapter 5 or line charts see Chapter 6 give you just the right information for what you need. The chart reader can see the opening and closing stock price with a wider area in between called the body for each day with a wick strung through the body of the candle.
The wicks sticking out from the candlestick bar show the extremes of the price movement throughout the day. If it is hollow, the close was higher than the open. If it is filled in, the closing price was lower than when the markets opened.
On a hollow candle, the close is shown at the top of the body of the candle. On a filled-in candle, the close is shown at the bottom of the body of the candle. This candle shape is called a doji.
Notice the closing price of Apple Inc. It may. The hollow or filled candle style is a subtle change that makes the individual candles for each day stand out more than other displays we discuss in this book. When looking at the body of the candlestick, pay close attention to the components as well as the shapes of the candles. Each candle body has several components, which you can see in Figure These components provide various pieces of information:.
The difference between the two prices, which is the body Hollow candle moved higher through the day. You can visualize these differences in the candlestick shapes shown in Figure A long, hollow body suggests the price moved up significantly in a single day, with buying pressure pushing it aggressively higher. A short, hollow body suggests the market was positive through the day but change was not huge. A line across the middle of the shadow, referred to as a doji, means the market opened and closed at or near the same level, usually meaning the market is balanced at that price.
The size of each shadow shows you how far the price moved away from the two key times of the day, the open and the close. You can see the differences in shadows in Figure The shadows, or wicks, mean different things on a hollow body of the candle:.
Long shadows above a hollow candle suggest very little support at the higher level. A bear market is a market in which stock prices are falling. People holding stock tend to begin selling stock. Short shadows above a hollow body suggest the high was near to the close. A bull market is a market in which stock prices are rising.
People tend to buy stock in this type of market. No shadow above means the price climbed all day and closed at the highest price of the day. Very bullish. Long shadows below a hollow body mean the price moved significantly lower during the day, but then buyers came in and pushed the price back up above the open. As we note in the preceding section, the size of each wick shows you how far the price moved away from the two key times of the day, the open and the close.
The shadows mean different things on a filled body of the candle. Shadow differences on filled candles are shown in Figure Long shadows above a filled-in body suggest very little support at the higher level. The price traded higher during the day and then dropped and fell below the open to close down on the day. Short shadows above a filled body suggest the price tried to go higher after the open but then traded down, moved below the open, and closed down from there. Little or no shadow above means the price opened and fell all day.
The candlestick chart style does not try to connect the price points together. On a candlestick chart these are called windows rather than gaps. The software uses the difference between a close higher than the day before or lower than the day before. For example, choosing one color that will show a close higher than the day before highlights an up day.
Using a second color for a day when the market closes lower than the day before highlights a down day. The majority of the time, the information from the hollow or filled candlestick coincides with the color code of the day:. A hollow candle that shows price moved up from the open to the close may also show that the price closed up compared to the previous day.
A filled candle shows price moved down from the open to the close. This closing price may also be lower than the close of the previous day. You can see two distinguishing candles that show up when you use color to view the candles. Their unique qualities show up best on a color candlestick chart, but you can see the difference in the shading on a monochrome chart as well:.
The filled candles show price action moving down between the open and close. This becomes even more distinct when color is used because when the price closes above the previous day, the computer will use an up color with a filled candle. The hollow candles show price action moving up between the open and close. When you use color, if the price closes below the previous day, the computer will use the color you chose as the down color with a hollow candle.
Examples of these two unique candles are shown in Figure The candles of interest are on March 8 and March These candles show up infrequently but represent important information:. The March 8 candle closed below the open but above the previous day.
It is a filled candle because it closed below the open, and the colored candlestick chart displays the color of an up day, meaning that it closed above the previous day. On March 22 the intraday price action was up, so the candle is hollow, but the price closed below the previous day, so it is given the color of a down day compared to the day before.
It does not always work out, but these unique candles sometimes mark turns in the market or important inflection points in the market. In the Citigroup example in Figure , they marked a short-term high on March 8 and very close to a short-term low on March You can see other instances on the chart where these unique candles had no short-term influence.
To get started, go to stockcharts. In the Chart Attributes area, you can create a candlestick chart by selecting Candlesticks in the Type drop-down menu. After selecting Candlesticks, you will need to click Update if the chart was in a different display format.
You can see the tool for Chart Attributes in Figure A good one to change is the size from the Size drop-down menu. For example, you can select Landscape or from the Size menu and click Update. Members can save the chart style as a default.
In Parts 3 and 4, we introduce all the.
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