The Difference Between Trading Styles and Strategies
AAPL is a good
example of a popular retail stock, with adequate liquidity for just about any
Trading Style. It is important to know WHO is trading and controlling price at
the moment, because that tells you HOW price will behave in the near term.
Applying the
knowledge of Technical Analysis, requires Relational Technical Analysis™
and interpretation. This type of analysis is a basic trading skill, but once
you have it you must apply that knowledge to your analysis in a manner that
tells what to expect next in short-term trading price action which requires
Relational Technical Analysis.
AAPL Analysis Part 2
– Trading Styles
The retail trading
community tends to all trade similarly, so their candlestick pattern footprints
are obvious. Their runs are inconsistent for a variety of reasons, and it is
this group along with Smaller Funds and plenty of High Frequency Trader
triggers that have been moving AAPL stock up. Meanwhile the giant Buy Side
Institutions have been in Quiet Rotation™ mode, quietly selling stocks into the
upward price action created by the Retail Traders and Smaller Funds.
What happens with
most Retail Traders is they prefer a specific style including Intraday, Day,
Swing, Momentum, and Position Trading which is holding for a few weeks. However
they never consider whether the stock they have chosen is suitable in its price
trend for their preferred Trading Style. Swing Trading as an example, requires
the presence of giant Buy Side Institutions using Dark Pool orders and
Professional Traders with the impending potential of a High Frequency Trading
run or gap.
Go
watch the TechniTrader
Tiny candlesticks
formed because the giant Buy Side Institutions using Alternative Trading
Systems off the Exchanges which create Dark Pools, were selling into the retail
crowd buying. The stock did not move because the selling is controlled and
contained within a Dark Pool Quiet Rotation™ zone which the retail crowd had no
idea was happening.
See chart example #2
below, which is a Daily view.
Eventually
Professional Traders identify the Quiet Rotation happening due to liquidity
draws, and start the selling short which moves the stock down. This was not a
stock to attempt to Swing Trade because it lacked upside momentum, due to the
missing Professional Traders who were not buying this stock.
Summary
Since the Buy Side
Institutions were not buying the stock, it did not moved back into a Dark Pool
Buy Zone. Yes there is a one day run, but few Retail Traders entered AAPL
before the stock ran up that day.
Knowing HOW to trade
the stock based on WHO is in control of price and whether that group is buying
or selling, tells you what Trading Style will work best for a stock. If
that is NOT your preferred style, then you must either learn an additional
Trading Style OR choose a different stock to trade.
Remember that a
strategy is not a Trading Style. Strategies are applied as a tactical
approach after a style is chosen, and a stock that is suitable for that style
is selected. The strategy for the price action can then be properly applied.
Ever wonder why your favorite strategy suddenly stops working? That happens
when different Market Participant Groups gain control of the stock price
action.
Go to the Learning
Center and watch a wide variety of training webinars.
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to the TechniTrader
Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDs with every course.
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