AAPL Analysis Part 2 – Trading Styles

The Difference Between Learning and Applying Knowledge
Many of you watch hundreds of videos or webinars, read every article or commentary but still are not making consistent profits.
The problem is often in applying what you have learned. Educators and professors all face the same dilemma when teaching, which is how to train their students to apply what they learn. AAPL is a good example. It is a popular retail stock, with adequate liquidity for just about any Trading Style. 
However, liquidity is not the issue. Last week the discussion was on what different Market Participant Groups were currently trading or had traded AAPL. Some of you wonder why this is important.
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. We had some huge rallies and runs in big name blue chip stocks last week and this week, but AAPL was not one of them. Do you know why? If you wanted to get in on the action of the rally and AAPL was one of your favorite stocks you regularly trade, then you would have missed out on the profits other stocks made like GS, JPM, MCD, GE, AXP, and UNH which are all stocks on the Dow 30. 
Applying the knowledge of Technical Analysis, requires Relational Analysis™ and interpretation. Technical Analysis is a basic trading skill, but once you have it you must apply that knowledge to your analysis in a manner that tells you what to expect next in short-term trading price action which requires Relational Analysis.
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AAPL Analysis Part 2 – Trading Styles
The retail trading community tends to all trade similarly, so their candlestick footprints are obvious. Their runs are inconsistent for a variety of reasons, and it is this group along with Smaller Funds and plenty of HFT triggers that have been moving AAPL stock up. Meanwhile the 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. The Buy Side Institutions footprint patterns have been present in this stock since mid-September.
This fact then tells you which Trading Style is most suitable for this particular stock. 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 Dark Pools and Professional Traders with the impending potential of a High Frequency Trading HFT run or gap.
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IF these Market Participant Groups are not buying the stock, then the result is what happened in October. Tiny candlesticks formed because the Giant Buy Side Institutions using Dark Pools were selling into the retail crowd’s 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.

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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.
Since the Buy Side Institutions were not buying the stock and it had not moved back into a Dark Pool Buy Zone, the Presidential Rally did not happen for this stock. 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 chose a different stock to trade.
Remember that a strategy is not a Trading Style 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.
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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
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