If you day trade stocks, you probably use some form of intraday stock charts on your day trading software for analysis. Even trading firms which specialize in tape reading may keep an eye on a chart of the overall index just for a quick reference!
While the market's mechanics are changing due to changes at the exchanges, greater reliance on algorithms by the institutions to execute trades, and other regulatory changes you still can use intraday stock charts to help you in your trading. There are several things you can do to have some foresight when it comes to your day trading:
- Use a longer-term time frame on a chart to understand the "big picture." For example, if you trade using 10-minute charts, take a look at the daily and hourly charts. Even you classify yourself as a "scalper", taking trades with an expectation of making less than 1% of the stock's current price (meaning a profit target of less than $0.30 for a $30.00 stock), the larger time frame charts will help you filter out those which are nearing significant support or resistance.
- Use charts showing the market internals. Intraday charts showing the TICK, TRIN, TIKI (Dow Jones TICK), TIKQ (Nasdaq TICK), Fair Value, and other market internals may be useful to your day trading styles. If nothing else, consider adding at least one or two market internals as parameters if you back-test any intraday trading strategies. For example, back-test the exact same strategy when the TRIN is less than a certain value; and then compare the back-testing results when the TRIN is above, or equal to, that certain value.
- Some day trading software packages may even allow you to put technical indicators (such as moving averages or RSI) on your market internals charts. Test this capability of your day trading software to determine if and when it will have any relevance for you.
- Do your end-of-day homework to determine which symbols have a likelihood of going up the next day and those which have a likelihood of going down the next day. While there are absolutely no guarantees in the market, using charts to help you determine POSSIBLE market direction can help you narrow your focus for the next trading session.
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Source: www.ezinearticles.com
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