Adding Quantity, Volume, or Flow of Funds Indicators to the Analysis
One of the most
exasperating things that happen to Retail and Technical Traders is to find a
chart with a perfect setup but the stock has already gapped or run up with a
huge one day gain, as High Frequency Trading algorithms triggered the running
or gapping of the stock up in the first few minutes of the trading day.
Many traders want to
learn how to capture these gains, and be in the stock before a huge gap or big
run day and improving the use of Bollinger Bands is the best method.
Go watch the Bollinger Bands webinar, to experience for yourself the excellence of TechniTrader
education. TechniTrader is "The Gold Standard in Stock Market Education.”
Bollinger Bands are
the best Channel Indicators for Technical Trading, and for finding breakout
compression patterns prior to gaps or runs. The ability of the bands to expand
and contract, makes them the ideal Channel Indicator to use. However as with
ALL Channel, Price, and Time Indicators they require additional indicators as
directional signals.
Bollinger Bands tell
you that a stock is poised for a strong Momentum Run or gap, but do not tell
you whether the Breakout will be to the Upside or Downside. During Trading
Range Market Conditions it is impossible to “guess” the Breakout direction
solely using Price and Time Indicators.
Employing Quantity,
Volume, or Flow of Funds Indicators provides the complete set of indicator
analysis to determine the direction of the Breakout when using Bollinger Bands.
When trading Options this eliminates the need for Options strategies that buy
both a Call and a Put, because the trader has no idea what direction the
Breakout will go. When trading stocks it eliminates the risk of whipsaw action,
or just assuming that because the Indexes are down that the Breakout will be
down also.
Go watch "The Basics of the Stock Market for
New Investors and Beginning Traders" 12 Webinar Lessons, to experience
for yourself the excellence of TechniTrader education. TechniTrader is
"The Gold Standard in Stock Market Education."
This is especially
helpful during Bottoming Market Conditions when stocks frequently retest prior
bottom lows. Below is a chart example with Volume and Quantity Indicator
windows.
1. Quantity
Indicators reveal the slow Quiet Rotation™ and Quiet Distribution, and
Quiet Accumulation patterns of the giant Buy Side Institutions. The Accum/Dist
Indicator has been steadily rising even while price is in a compression mode.
Quantity indicators are used by Professional Traders regularly, but are rarely
used by Retail Traders. There are both line and histogram Quantity Indicators
available.
Go watch "How to Trade the Stock
Market" webinar, to experience for yourself the excellence of TechniTrader
education. TechniTrader is "The Gold Standard in Stock Market
Education."
2. Volume
Oscillators are also seldom used by Retail Traders. These offer a
significant advantage over Price and Time Oscillators, which tend to give false
signal during Momentum Runs, Velocity Runs and other fast moving price action
that exceeds the parameters of the price oscillator scaling.
3. Flow of Funds
Indicators is another group of indicators that help determine direction of
a Breakout. Often times Smaller Funds and Independent Investors are selling, at
the same time giant Buy Side Institutions are quietly buying the same stock
hidden from view on Dark Pool venues. These types of indicators show whether
money is flowing into or out of the stock.
By incorporating
additional indicators into the stock analysis, Retail and Technical Traders can
significantly improve their trading profits by identifying the direction of the
Breakout prior to price suddenly moving with momentum, a gap, or velocity
action caused by HFT triggers.
Summary
Quantity, Volume, or
Flow of Funds Indicators are easy to interpret, provide the missing data for a
complete stock pick analysis during sideways patterns, and are best for
improving the use of Bollinger Bands.
For Options Traders
this is a far more useful analysis than traditional Options Indicators, and it
can lower contract costs by providing the missing data needed to choose the
proper contract and Option strategy.
Go watch a wide variety of webinars, to experience
for yourself the excellence of TechniTrader education. TechniTrader is
"The Gold Standard in Stock Market Education."
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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
TechniTrader DVDs with every course.
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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.