Volume, Volume, Volume...

Last week I explained the reasons why I’ll never focus on fundamental analysis when it comes to trading (If you missed it be sure to check out why I hate trading off fundamentals...)

But this week I want to go further into my journey into technical analysis, not only how I got started, but also exactly what I’m looking for when I take a position (hint: it involves volume).

When I first decided to throw myself into learning about TA and trend trading the first thing I wanted to know, was EXACTLY what the top hedge funds on Wall Street were up to.

Many were technically based and focused on how a stock would close. If a stock closed above a certain price point where it kept it in an uptrend, they would stay with it. That's where the light bulb went off for me. Well, that makes sense… why am I trading anything but the trend? I needed to figure out how to find those trends, enter those trades, and stay in them as long as possible, but also create some type of rule or process to get out of those stocks once a trend is broken or I reach a profit or an objective.

So I started looking at charts and digging deep into websites that I could use to learn more about these charts. That's where I learned all of my stuff: the moving average, an oscillator, the RSI, and the ultimate oscillator- that's one of my favorites. Like any technical indicator, however, there's no holy grail on wall street, there's no holy grail in technical analysis, and there's no holy grail in reading charts - all you're trying to do is put the puzzle together.

And that’s when the concept of hacking charts first occurred to me.

When I look at a chart, I see the big picture. I don’t care how you cut it-- at the end of the day, it's all just human behavior behind that chart! Even if it's programmed trading and you’re going up against the fastest algorithms in the game, you know what the desired outcome will be (after all those algorithms were programmed by people with one ultimate goal in mind… to make bank.

And because of that, I’ve never felt intimidated about getting in the game with (and sometimes against) the sophisticated software and algorithms that the big institutions like to toss around.

Because I figured out the one huge advantage that retail traders will hold over those institutions every time...

At hedge funds, those guys are managing billions of dollars and do not have the quickness that I have to move in and out of equities. Institutions can have all the information in the world, they can write the best software ever invented since man came upon this earth, but at the end of the day they will never be as stealthy about it.

Retail investors fly under the radar...

When you place an order, even if you buy a 100,000 shares of a penny stock – you might move it a little but you're still going to go unnoticed.

And I've got a story to prove it... next time I'll break down one of my recent wins and show you exactly what I was looking for and how I was able to read the situation and hack the chart to make some big profits.

RP

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Posted to Zero Sum Trading on Jun 10, 2015 — 5:06 PM

Recent free content from Roberto Pedone

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