Author Archive: curtis

Chandelier Exits

Chandelier Exits

Alexander Elder introduced Chuck LeBeau’s Chandelier Exits trend-following system in his 2002 book Come Into My Trading Room. The system dangles a multiple of Average True Range from Highs during an up-trend and adds them to Lows during a down-trend. There are several similar systems that use ATR, each with their own strengths and weaknesses:

Dr Elder also developed SafeZone Stops based on Directional Movement rather than Average True Range.

Chandelier Trading Signals

Chandelier Exits are primarily used as a stop loss mechanism to time exits from a trending market.

  • Exit long positions when price crosses below the Chandelier line
  • Exit short positions when price crosses above the Chandelier line

Chandeliers cannot be used for entries like some other volatility systems as they would be prone to whipsaw in and out of a trade.

 

Example

The RJ CRB Commodities Index late 2008 down-trend is displayed with Chandelier Exit (short, 22 days and 3 x ATR) and 63-day exponential moving average used as a trend filter. Entries are taken when price makes a new 5-day low while below the moving average (or 5-day high when above the MA).

RJ CRB Commodities Index with Chandelier Exit

Mouse over chart captions to display trading signals.

  1. Go short [S] when price is below the Chandelier Exit and closes below the 63-day exponential moving average
  2. Exit [X] when price crosses above the Chandelier Exit
  3. Go short [S] when price makes a new 5-day low while below the 63-day exponential moving average
  4. Exit [X] when price crosses above the Chandelier Exit
  5. Go short [S] when price makes a new 5-day low while below the 63-day exponential moving average
  6. Exit [X] when price crosses above the Chandelier Exit

Chandelier Setup

The default settings for Chandelier exits are a 22-day period and a multiple of 3.0 times Average True Range.

See Indicator Panel for directions on how to set up an indicator — and Edit Indicator Settings to change the settings.

 

Chandelier Formula

Chandelier Exits subtract a multiple of Average True Range (“ATR”) from the highest high for the selected period. Using the default settings as an example:

Highest High in last 22 days – 3 * ATR for 22 days

In a down-trend the formula is reversed:

Lowest Low in last 22 days + 3 * ATR for 22 days

  • The time period must be long enough to capture the highest point of the recent up-trend: too short and the stops move downward; too long and the high may be taken from a previous down-trend.
  • It is not essential to use the same period for up and down trends; down-trends are notoriously faster than up-trends and may benefit from a shorter time period.
  • The multiple of 3 may be varied, but most traders settle between 2.5 and 3.5.

Chandelier Evaluation

I am uneasy with stops moving lower during an up-trend. This may occur with Chandelier Exits when:

  1. Average True Range increases, or
  2. No new high is made during the selected time frame (22-days in the earlier example).

Welles Wilder’s Volatility Stops formula eliminates the second issue, but uses Closing Price rather than Highs and Lows. Average True Range Trailing Stops, on the other hand, offer both High/Low and Closing Price options and use a ratchet mechanism to prevent stops from falling during an up-trend or rising during a down-trend.

From Incredible Charts Website Thanks

 

What is the Stock Market

What is the Stock Market?

The stock market is where the buying and selling of stocks or shares of publicly held companies are issued and traded, these stocks are bought and sold by a collection of buyers and sellers. This trading often takes place at Stock Exchanges and offers companies with capital in exchange for giving shareholders a slice of ownership in the company. Trading started more than 300 years ago in Europe and also in Japan with Rice. Early London traders met in coffee houses. Much of the trading is no longer face to face but electronically where computers pair up buyers and sellers.

Shareholders that are investing money make money when stocks are sold for more than they were purchased (capital gains). When companies are profitable some also pay dividends. The higher the dividend yield the more the shareholder makes.

From Stock Trading Strategies

 

Moving Averages

Moving Averages

A Moving Average is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations.

A moving average (MA) is a trend-following or lagging indicator because it is based on past prices.

The two basic and commonly used MAs are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives bigger weight to more recent prices.

The most common applications of MAs are to identify the trend direction and to determine support and resistance levels.   Investopedia

MA Crossover

 

MA Crossover2


 

 

Below When the price moves above the 21 day moving average we are ready to trade, and when the price fully moves below the 21 day ma then we are ready to sell.

MA Crossover BS

Support & Resistance

Support

 

A support level is level where the price tends to find support as it is going down. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

wikipedia Support and resistance

 

ssupport2 support

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Resistance

 

A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level.  Wikipedia Support_and_resistance

Resistance

 


Support and Resistance

Support and Resistance

Support and Resistance

Support and Resistance2

Support and Resistance3

 

 

 

 

 

 

 

 

 

Volume

Volume is a measure of how much of a given financial asset has been traded in a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity.

 

Volume

 

 

Trading Strategies

Scalping – Very Short

Day Trading

Swing – 1 to 7 days

Position or Buy & Hold – Long Term (Years?)

 

stock-trading-strategies

 

 


Charting Basics

  • Time vs Price
  • Types of Charts

–Line Charts

–Bar Charts

Candlestick Charts

 

  • Long and Short Term Charts in Trading
  • Hourly / Daily / Weekly / Monthly Charts

 


Time vs Price

 

 


 

Line Chart

 


 

Prices

Open – Close

High – Low

Bid – Ask


 

 

Bar Chart

Bar Chart


 

 

Candle Chart

Candle Chart


Trends

 


Downtrend

Downtrend

Uptrend

Uptrend

Sideways Trend

Sideways Trend

Disclaimer

The information on this presentation is for educational purposes only. It is not intended as financial or investment advice, and should not be relied on as such. Before making any commitment of a financial nature you should do your own research and seek advice from a qualified and registered investment adviser.

Technical Analysis

What is a Stock

Plain and simple, a stock is a share in the ownership of a company. Stock represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.

Being an Owner

Holding a company’s stock means that you are one of the many owners (shareholders) of a company and, as such, you have a claim (albeit usually very small) to everything the company owns. Yes, this means that technically you own a tiny sliver of every piece of furniture, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company’s earnings as well as any voting rights attached to the stock.

www.investopedia.com

 


 

Technical Analysis vs Fundamental Analysis

Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. Fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies.

Technical analysis is the evaluation of securities by means of studying statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value but instead use stock charts to identify patterns and trends that may suggest what a stock will do in the future. http://www.investopedia.com/

 


 

The field of technical analysis is based on three assumptions:

  1. The market discounts everything.
  2. Price moves in trends.
  3. History tends to repeat itself.

 

1.The Market Discounts Everything

  • A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company.
  • Technical analysis assumes that, at any given time, a stock’s price reflects everything that has or could affect the company – including fundamental factors.
  • Technical analysts believe that the company’s fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately.

2. Price Moves in Trends

  • In technical analysis, price movements are believed to follow trends.
  • Once a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it.
  • Newton’s first law states that every object will remain in a similar motion unless compelled to change its state by the action of an external force.

3. History Tends To Repeat Itself

  • Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement.
  • The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time.
  • Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

http://www.investopedia.com/university/technical/techanalysis1/

 

Investing in the Stock Market

Introduction to Technical Analysis

By Curtis Baune  

Stock Market Charting

 

ABC Computer Training

ABC Computer Training

 

What will we cover

How to use software to analyse the stock market.

Types of charts and trends.

Indicators of change.

Investing in The Stock Market is:

  • Part Gambling
  • Part Guessing
  • Part Research
  • Part History
  • Part Psychology
  • Part Science / Math

The more You research, learn from history, study what others are doing, improve your math & science skills.

The less gambling and guessing you will be doing.

 


 

What skills are useful for you:

Being Analytical
The Ability to learn from your mistakes
Mathematically minded
Having some patience
Ability to time travel or know the future!

 

 


 

What is Technical Analysis

Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

stockcharts.com

 


What is a Stock

Plain and simple, a stock is a share in the ownership of a company. A Stock represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.

Being an Owner

Holding a company’s stock means that you are one of the many owners (shareholders) of a company and, as such, you have a claim (albeit usually very small) to everything the company owns. Yes, this means that technically you own a tiny sliver of every piece of furniture, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company’s earnings as well as any voting rights attached to the stock.

http://www.investopedia.com/

 


 

Dow Theory

Dow said that share prices tend to move in trends and that trends tended to continue until a major force acted to stop them. Dow identified three types of trends.

•An uptrend is when each successive high point is higher than the previous high, and the low points on the price chart also rise progressively.
•A downtrend is the opposite situation. Each successive low point is lower than the previous one.
•The third trend is when both averages fluctuate within a range of about 4% of the same value. Commonly referred to as ‘trading sideways’, Dow called this a ‘line’.