5 Tips Include Identify Candlestick Price Action
Oftentimes, traders just cannot find great stock picks quickly and easily. This leads many traders to resort to relying upon news, recommendations from gurus, social media, or online trading chat rooms. Unfortunately for those traders, High Frequency Traders HFT and other predatory systems can easily track and exploit Retail Traders who are using any of the above for their stock picks.
The candlestick chart example below is volatile.
Volatility, whipsaws, and weak follow through runs are all caused by predatory systems. These include High Frequency Traders HFT, Professional Traders, or even Retail Brokers due to the anomalies in order flow caused by all of the common ways that Retail Traders find stocks to trade.
Many Retail Traders still blame “Market Makers,” which is a common myth. However, 99% of all small lot orders are now fully automated, circumnavigating the Market Makers entirely in both the Stock Market and Options Market.
Instead, the real culprit to volatile price action, whipsaw action, poor fills, and lousy runs that do not net sufficient gains for profitable trades is Cluster Orders. They happen when too many Retail Traders are all attempting to trade the same stock at the same time, using the same “trading system” or “stock trading strategy.”
Here are 5 Tips to Finding Stocks to Trade Faster:
1. Know what price action precedes volatility, which is often a compression candlestick pattern.
In the chart example above, price moves often in what appears to be unexpected up and down action, which is often gapping. By recognizing price patterns that precede sudden moves, traders can take advantage of the sudden runs.
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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