TECHNICAL INDICATORS





My way of using technical indicators:

1] Always monitor channels, pennants, flags and trendlines for your graph analysis.

MOVING AVERAGES
Using the 10, 35, 50 and 200 day averages.
1. Buy when the close is above the 50 period and the 10 period average is above both the 35 and 50 period averages.
2. If the close is above the 50 period average but the 10 period average is above the 35 period average, exit shorts but do not go long.
3. Trade only in the direction of the moving averages, when there is a crossover in the moving averages trade only in the direction of the crossover.
4. When the market is trending and you are looking for a place to get in, wait for it to retrace to one of the moving averages or trendlines.
5. Assume that the main trendline or moving average will hold and not be broken. If it is strong it should act as a support and resisstance when the market approaches it.

ADX
1. When above 30, consider the trend very strong.
2. Below 20, consider the trend weak.
3. Trade only in the direction of the trend.
4. The higher the ADX the less likely that a full pullback will occur.
5. Take profits if below 20.
6. Add to position if above 30.
7. If it dips to below 30 after being above 30 for a time consider the trend to become choppy.

A cup with handle formation can take up to a year to form.

 OSCILLATORS (for trading within a range only)

STOCHASTICS
1. Buy when both lines are above the oversold level.
2. Buy when the fast line %K crosses over the slow line %D.
3. Be long when both lines are above the overbought area but not yet turning lower.
4. Buy when the indicator is strong and retests its extreme.
5. Look for a failed move.
6.Look for divergence. If you see the market making lower lows while the st indicator makes higher lows: this can indicate a trend change.

MCD
1. Buy when the dotted line is above the signal line and short only when it is below.
2. Buy when the crossover is below the zero line.
3. Buy when the moving averages cross above the signal line.
4. Look for divergence.

RSI
1. Buy when the RSI comes out of oversold territory.
2. Buy when the RSI stalls at the 50 line.
3. Buy when the RSI is above the 50 line.
4. Look for divergence between price action and the indicator,.

STANDARD DEVIATION
1. Can be used for stops and stop limit orders for hedging protection on your portfolio.

Timing

Getting in at the right time is crucial. The 3ed Friday of every month and especially triple witching Friday are good turning points. If the market had a huge run either up or down leading into that day you can usually expect it to reverse for the following week.

 

Other attractive periods when you can enter: 

When a stock has a pullback from its annual high,

When insiders buy at the annual high

When the stock exhibits a short squeeze situation.
Expect to make money in spurts, success may be a marathon but making money is in knowing when to run the sprint. Time value erodes very quickly as expiration comes near therefore exit purchased Options no later than 1 month before expiration.



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