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Intraday Chart - Theory Of Execution |
| Category: Technical Analysis, Trading Activity |
Published: 14-12-2007 |
By: Traph |
| [click to enlarge] |
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| ELR |
Hi Troopers 
I feel obliged somewhat to take my last Newbie post a step
further due to the extreme positive feedback received from many members on
Topstocks.
It was also great to know through PMs and personal emails that
many members subscribed to become PRO members as they feel confident Topstocks
is an excellent site on the Internet and a community proud to be part of. So to
those new PRO members I am sure all PRO members on here share my view in
welcoming you with open arms.
The post I refer to of course is titled
"Day Trade Your Way to a Lifestyle!"
http://www.topstocks.com.au/asx_discussion_forum_home.php?action=readpost&pid=149909#d3Kwmz77-w341149909
This
post will take the initial post a step further in disecting the intraday chart
in order to understand why and where these triggers or buy/sell signals are
triggered and how to differentiate between ligitamate signals and false
signals.
I must admit it is a huge learning curve, one I still get wrong
from time to time, not because my method is flawed but because at times when
decisions are to be made in a split second, you tend to miss an indicator which
is alarming of a false signal!
I will detail these signals and will break
up the chart down to a minute as I interpret it.
Many will tend to think
that this post is not valid! Many will tend to think and may even comment that
this post is now in hindsight but there would be no way that I could interpret
the chart movement before it actually trends in the direction I anticipate it to
move.
All I can say to that is that's not true!
I attach the ELK
intraday chart here as this was latest traded and you may refer to the thread on
the forum and find at in some of my posts I was very positive of it's movements
on the day. What I did fail to do as it was very volatile was to have the
ability to multitask it and the forum so my second entry into ELK was not as
timely as my first entry and exit!
The reason being is that although I
know what I was doing I also missed the false indicators being triggered as I
was busy looking at other charts as well. This is very common hence my reason to
concentrate on as few stocks day trading because concentration is
crucial.
There are no fundamentals entered into here, and the trade
execution is based purely on the Intraday and the volatility
the stock presents for the specific time frame. Undertsanding the combinations
of those indicators is the difference between realising a profit after a good
entry and a loss after a bad one.
Also important to keep in mind that you
are not alone trading this, for there are many doing exactly the same thing at
most likely the same instant you're doing it, the trick here is timing and
pre-empting the moves, that's where some mistakes can be made. So if mistakes
can be made, we need to insure these mistakes can be corrected, therefore the
entry and exits are crucial.
It is best to follow this post with the
Intraday chart open and check the timeline being discussed then refer to the
chart and you'll see how easy this can be observed.
I have mentioned this
many times before, no trading on open. This is crucial as we have no indication
of any type what is likely to process during the day until all indicators fire
up and are in sync.
Firstly you will note that the momentum indicator
does not kick in for a little while before the chart gets more necessary data.
Waiting for this indicator to kick in is very important as it is used in
combination with the MACD histogram.
The arrows displayed on the main
chart are signal indicators for movement and should not be treated as buy/sell
signals! they quite often are not correct!
The use of the 5 indicators
below the main chart in combination is what provides the buy/signal triggers,
without those the chart is just pretty to look at and quite useless as
well.
The VWAP indicates the overall trend for the day as described many
times before. As it rises it is used to gauge an end to the day being reflected
by the open of the day by comparison.
It is crucial to put weight on each
indicator! The 5 indicators used would total a weight of 100% and I tend to
break those indicators in percentage form in order to maximise
entries.
Indicator Weights:
Volume 10%
MACD Histogram
30%
Momentum 30%
RSI
20%
Acc/Dist 10%
Also a crucial point to keep in mind as there are
many points to observe on the Intraday is the height of the Bars and their
relevance to the zero line. Above the zero line is is positive and below is
negative. The height is also respected both above and below.
ELK Intraday Chart
From 10:00AM to approx 11:00AM
the stock trended strongly upwards however also declined somewhat.
At
approx 10:32AM our Momentum indicator kicked in signalling a potential entry.
How was that a potential entry?
If you look at the MACD histogram and the
Momentum they both have significant GREEN bars becoming positive simultaneously
and most importantly RISING!!! Coupled with positive Volume bars (Green),
RSI
above 70%, ACC/Dist rising makes for an excellent combination for an entry.
However too early as this could easily be day traders attempting to spike the
stock for interest!
As you can see the attempt to spike the stock was
successful as it declined just before 11:00AM by people taking profit. Also
important to understand what share price of late the stock was issued for, as
this will also indicate the level of profits that are likely to be
taken.
Between 10:41AM and 10:55AM you will note all the indicators
discussed above have now reversed! it an entry was executed at 10:32AM then this
would have signalled an exit at market, realising substantial profits obviously
dependant upon your capital. The momentum gained the share price at that time a
whopping 8 cents in approx 8 minutes! on a 100K, a profit of $8K would have been
realised.
The next significant entry was at 11:14AM when all indicators
returned positive once more. That was a significant trend as you can see from
the POSITIVE green bars for both MACD and Momentum, the spike in both RSI
and Acc/Dist.
The exit for that point would have been at approx 11:56AM
as MACD began it's decline below the zero line. Also was noted that the Acc/Dist
was still rising hence we now know that there are further entry points during
the day so taking profit at this stage far outweights the risk of sideway
movement or decline if it eventuates.
The rest of the chart is self
explanatory as you can see after that point there was one further spike with a
decline for the rest of the day. VWAP still trended high so that indicated that
there should be no dumping of the stock at close as it did'nt!
Hope this
was informative for you guys and gals following my previous Newbie
post.
I wish to ask as I have not asked of this before, that this post
not get copied to other forums and be retained at Topstocks for the benefit of
all PRO members concerned and in the hope that it encourages Free members
subscribing as PRO members. I do not ask anything else.
Have a great
Sunday and good luck tomorrow as we see the Bulls rage once more
Cheers
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; "ELR")
