Anatomy of a trend pivot/ Disclaimer.

Welcome.

If you are looking for certainty inside the stock market, find another hobby or carrier, markets are very uncertain.


Over the years I've saved and studied thousands of charts and this is the gist of it. 
Will reading these lessons help your investing/ trading? I think so, they help me every single day.
Will these lessons help you master the markets? Yes, if you have the time it requires to implement every step, in a few short years you'll uncover some key nuances that were omitted or not emphasized on the lessons.

Trading consistency can be acquired once you removed all the things that are confusing you. Price is king.
 
All things being equal technical analysis helps you analyze who is in control of price at a given moment by simply observing a chart that meets certain parameters that you have trained your brain to recognize in practice or theory. 
like trying to catch a fly ball should be easy once your brain subconsciously measured the ball's  direction, elevation, velocity and distance from you. The wind's velocity, the weather on the field and everything else that applies at that moment the ball is fast approaching your glove.
Said mental analysis gets acquired after a good amount of game theory and practice, with that experience you end up catching the ball with ease most times. Isn't your trained brain awesome? 
That is why technical analysis TA. Exists, to help people make an educated guess by weighing the odds to help them anticipate future direction of price with a good degree of accuracy, in time you'll develop that ability if you invest time to study it. 

That said TA. Can't always help you guess future price with good accuracy, back to the fly ball analogy, when you are trying to catch the same ball under the same conditions but a tornado gets in your way totally changing the direction of the ball, what should you do? (you should always have a plan for that, too), you have to get out of the way to avoid getting hit in the head with the ball. 
That is where TA. Finds its limitations. When big news affect your stock, it breaks the perceived equilibrium between buyers and sellers in the form of big opening gaps or big violent bars that totally traps one side and creates a massive share imbalance (and throws the chart into chaos). If you are trained to recognize how the masses get trapped, taking the opposite side of their trade will make you lots of money.
Stable trends in a moving along economy for the most part don't change that easy on the weekly and monthly charts of most stocks because the big funds can not accumulate or sell millions of shares of any company in a single day with out altering the price too much thus the ebb and flow to accumulate on the pullbacks and or to sell on big up moves, if the larger time frames agree.

First: The most important piece of the technical analysis puzzle: Trend analysis and the inflection points of new trend formations.

The second: Trend pivot formation, interaction inside the trend and the signals it sends.

The third: The influence the larger time frame has (the daily chart in this case) on the direction of the smaller time frames (15 minute chart in this case).

The fourth: Momentum helps you visually analyze the involvement or lack thereof from the masses inside the auction, powerful up moves that form shallow pullbacks near an area of support or resistance? or nothing in the case of a new all time high. And what action most likely will follow? It depends on the answer of the first question.
The fifth: A bullish consolidation near the top of a range, ready to break out in an area of zero or no resistance above it signals the intentions of the masses to push price to a higher level with ease, because inside an area of no resistance most sellers were absorbed before entering it, there are not many sellers left to stop the next leg higher as seen on the QQQ chart (lower right). Price like water follows the path of least resistance.
The sixth: Look for a noticeable increase in volume to confirm the ongoing breakout, without it odds are high is a trap.

The chart of AAPL. On this day, after the HL Pivot Had completed on the 15 minute chart it gave a 7$ reward to all longs that were holding for next cycle higher. This pattern (followed by algos or computer programs inside the auction) repeats itself in all time frames, it's very rewarding specially on the larger time frames.
This HL Pivot formation on the upper part of the big move is followed and capitalized by many professionals, this area is where Fibonacci retracement are widely used to gauge the signals the crowds are sending about the coming move.
That is why the set up bar is so important in trend analysis, combined with other factors reviewed on this blog, it alerts traders and algos that the odds are high a new HL Pivot will complete and the next move will be in the direction of the prevailing trend if is not too extended.

Don't worry if the explanations above don't make much sense, after you read 20 lessons on this blog, it will make much more sense.

Next chart displays the interaction of trend pivots, moving averages and the void or lack of resistance overhead or support underneath, on a bounce that ended up changing the trend. 
When a possible change in the trend is occurring, most market participants won't know it's taking place unless they recognize the anatomy of it. But you'll recognize what is happening once you understand this lesson.

Seen on two different time frames the daily and weekly charts. For more in depth analysis of the trend read the next lesson.

Lesson #2 Trend analysis using pivots: http://chalannn.blogspot.com/2012/08/trend-analysis-using-pivots.html

Putting it all together: http://chalannn.blogspot.com/2014/02/finding-trades-at-specific-areas-inside.html




Lesson's exercise: Have a daily chart with only candlesticks and moving averages (no indicators of any kind), look for the obvious trend, where is this seven candle formation called pivot forming and what happens after it forms? 
Hopefully you can begin deciphering a new simpler message the markets are sending.

If you are a beginner or seasoned in the markets but not making money consistently I'm for hire for a few hours, days, weeks or months, if you need a mentor I'm for hire. Send me an e-mail at digitalair@hotmail.com

This page describes the method that I use to analyze any stock, ETF, FX Currency markets, etc. Because price is determined inside an auction, everything supply and demand related can be put on charts to be thoroughly analyzed.
 
Patterns are the visual representation of the expectations of market participants, their behavior can be analyzed in depth to gauge how they are feeling about certain market conditions and to identify where they are trapped or about to be to trapped, to take the other side of their trade, thus becoming a cotrarian trader when the charts are giving you the right signals.
Over the years I've saved and studied 1000s of charts and this is the gist of it. 


Card counting at the Black Jack table is "discouraged" in states where gambling is legal, but why? When the dealer is using two decks of cards and most of the single digit cards already came out, a sharp card counter knowing the odds are in his/ her favor can make higher bets and beat the establishment.
There is a way to do the same, legally on the stock market. Successful trading/ investing is about executing the trade once the odds align in you favor, the higher the odds the better the results. MOST OF THE TIME.
To beat the markets we need to find the area in the chart where the best odds are on every trade we take, because there is no 100% certainty on anything market related.

The easy money has already been made by all participants in the markets, It is clear now that the markets turned predatory six months ago when QE ended, popular patterns that worked during last six years won't work consistently anymore and will trap the masses because professionals know that newbies and retail money are the last remains of the low hanging fruit.
Sharpen your analysis skills of king price as explained in depth on this blog, stay out of the markets if the violent moves don't make sense to you.


I've been trading 20 years, the first years were hit and miss, long and frustrating because in my opinion this industry thrives on deception and confusion.
After reading many books on technical analysis and trying all the indicators they recommended I wasn't able to improve my trading results.
Eventually I found a method (explained on this lesson) that was simple enough for me to use and get consistency in all markets on any direction, it analyses price action mostly.
Again. I use dozens of strategies but they all derived from this method.


Here is a list of issues that took some years of learning the hard way to make the method more solid. I'll try to explain them throughout the lessons, if you understand them and implement them, they will help you become a better trader or investor.

1- If you are not making money consistently or making it but losing it back, stop trading until you can correct what's causing the loses. Capital preservation is your number one priority during this process. If you are new to trading, find a coach, there is no need to create psychological scars by taking on a long and costly learning curve.
2- Find a method that best fits your personality and improve on it, the simpler it is the better.
3- Always trade with the trend on your side, learn trend analysis.
4- Don't trade against the prevailing trend unless it got very extended or has climax volume.
5- Don't buy after an extended move (missed money is better that lost money) wait for the auction to shake down late buyers and weak hands to enter once the pullback PB. Losses downside momentum, said PB Needs to be shallow. Or let price form a base first.
6- Learn to identify when the masses are trapped to bet on the opposite direction, Gaps, engulfing bars, long bases that breakout/ down immediately reversing violently trapping the unsuspecting thus creating a massive price imbalance, among other advance techniques.
7- Break outs/downs from long bases that have follow through in the direction of the prevailing trend offer the best risk/ reward trades.
8- Learn how the monthly and weekly charts influence the oscillation or wavelike  behavior of price on the daily chart, even intra-day time frames.
9- Study price behavior on areas of support and resistance.
10- Learn to read price action: Price momentum, expansion or contraction and the message these signals send.
11- Learn how and when trend pivots form to identify places in the chart to put your stops to protect you in case your trade doesn't work thus avoiding massive losses.
12- Write a trading plan and follow it.
13- Use appropriate share size to always risk losing the same amount of money on each trade.
14- Do not trade with SCARED MONEY. Give your trade room and time to work once the right area in the chart has been identified, let the trade hit your target or your stop.
15- Avoid emotional trading: Use a technical map or charts to enter and exit your trades, print charts of said trades to analyze your entry and exit points, if you made an obvious mistake write it down on the chart, analyze it over and over again so you don't commit that mistake again.
16- At first get very familiar with no more than three price patterns to trade, once you master those then begin leaning more.
17- Never average down on a losing position. Unless your proven trading /investing plan allows it. Some stocks turn into money pits: WLT. VJET. NUGT. DDD To name a few.

18- Trade what you see in the charts even if it contradicts what you believe will be the outcome. I mean if the headline on XYZ Is extremely bearish but you see it has a cup and handle pattern on the daily chart ready to explode higher, and it does on heavy buying volume, do you long the stock or stay out because of the headline or your bias? Use stops in case computer programs (algos) agree with your suspicion.

19- Paper trade until you can prove yourself that you can make $$ consistently.
20- Stay away from using margins unless you truly understand it's risk. Swiss Franc FX Markets anyone?

It looks like a big list. I know, so many issues to help you take money consistently from the smartest minds on Wall street.
Actually is more like a puzzle that I'll try to put together throughout the lessons on this blog. 

I think that if you study these lessons with an open mind, print some charts after that to test what you learned, you'll become a much better trader/ investor.


There are more in depth lesson above. 


Feel free to leave a comment. 


All charts are source www.eSignal.com