The Elder-Ray Indicator: Seeing Into The Market

 

The Elder-Ray
Understanding the Elder-ray is inextricably linked to an understanding of oscillators, which are figures used to find turning points in the markets. Oscillators are seen to be indicative of the emotional extremes of both bulls and bears. These extremes are fleeting and unsustainable levels of optimism or pessimism that the vast majority of market participants are exhibiting. Knowing that these extreme conditions never last long, professional traders often fare better than average investors in betting against such extremes. When the market rises and the bulls are greediest, the pros sell short. When the market is at its lowest and fear runs rampant, the pros jump in to buy.
Elder-ray labels its oscillator components as "bull power" or "bear power". These are combined with an exponential moving average, which is a trend-following indicator essential to the calculation. Bull power is a simple calculation, derived by subtracting an exponential moving average (perhaps a 13-day EMA) of closing prices from a high price of any given security. Bear power subtracts the EMA from the corresponding low price of that trading day. Both bull power and bear power are plotted as histograms under the bar chart of your chosen security.

Interpreting Elder Ray
Now, how do we go about interpreting the Elder-ray and its inherent components? First, you may remember that price is a consensus of value for any given security at a particular point in time. The moving average is simply a consensus of value that is extended for a certain window of time. The 13-day EMA referenced earlier is the average consensus of value over the past 13 days.
In interpreting the moving average, we are most concerned with its slope. When the slope rises, the crowd is becoming more bullish. When it falls, the crowd is more bearish. Clearly, the best course of action is to trade in the direction of the EMA. The high of the consensus of value occurs when bulls cannot lift prices any higher, thereby reaching their maximum power. And the low represents the lowest value to which the bears are capable of pushing the price, thereby reaching their maximum power. So the low shown on the daily bar is the maximum power of bears for the day; on the weekly bar is their maximum power during the week, and so forth.
By measuring the distance from the bar's high to the EMA, bull power represents the capacity of bulls to push prices above the average consensus of value (price). Bull power rises when bulls are stronger and falls when they are weaker, even becoming negative when they are utterly weak. Bear power, by contrast, is the capacity of bears to push prices below the moving average. The distance between the low and the EMA, which widens when the bears are weaker and narrows when they are stronger, gives this figure. Bear Power is typically negative, so if it turns positive, the bulls have taken complete control.
There are some very specific conditions you need to look for when using the Elder-ray in making buying/selling and shorting/covering decisions.
Here are the conditions essential for buying:

1. The trend is up as indicated by EMA.
2. Bear power is negative but rising.

There are two additional conditions fine-tune the buying decision:

1. Bull power's latest peak is higher than it was previously.
2. Bear power is moving higher from a bullish divergence. This situation provides traders with the strongest buy signal.

The corresponding sell signal is realized when prices hit a new high but bull power reaches a lower peak than that of its previous rally.
For shorting, two conditions are absolutely necessary:

1. The trend is down as indicated by EMA.
2. Bull power is positive but falling.

Two additional conditions provide a stronger signal for shorting, but they are not absolutely essential:

1. Bear power's latest bottom is deeper than any previous bottom.
2. Bull power is declining from a bearish divergence. As in the case of buying, the strongest signals for shorting are rendered by bearish divergences between bull power and prices.

In deciding when to cover short positions, it is important to interpret the time at which bear power indicates the weakness or strength of bears. A new low in price with a new low in bear power points to a continued downtrend; however, with bear power tracing a shallower bottom than prices, a bullish divergence is realized: cover your shorts and prepare for the ensuing uptrend.

The Bottom Line
Divergences between bull or bear power and prices indicate the best trading opportunities. The Elder-ray is an extremely accurate and effective means of identifying these opportunities.

Capitalize On False Breakouts In The Danger Zone

No matter if you're an investor, day trader or swing trader, you are exposed to the whipsaw of the danger zone - and it may be hurting you if you act impulsively. Anytime there is a pattern characterized by particular boundaries within which a stock fluctuates, a "danger zone" develops. This is the area just outside the established range. It can be called a danger zone because there are many conflicting interests in this area.

There are those that want the breakout to occur and are making transactions in that direction. There are those expecting the range to continue and are "fading the breakout." There are also the "predators" who may trigger the breakout only to drive the price back into the range. Finally, there are those who are waiting for the momentum to wane and then aggressively take the trade back the other direction.

Here we are going to focus on capitalizing on false breakouts by using a "danger zone" in conjunction with other indicators to verify that sometimes we should not trust the breakout, and should trade in the opposite direction instead. (Learn how to distinguish tops and bottoms in the equity market when short selling. Read Finding Short Candidates With Technical Analysis.)

Experience the Danger Zone
All experienced traders have seen it. A stock (or any instrument) has been within a defined trading range for some time and appears to have found its comfort zone. Buying ceases at a certain level and then selling commences. Selling continues until buying comes in aggressively at the low of the range and sellers back off. However, this balance breaks suddenly and the stock begins to move aggressively higher out of the range. The movement is sharp, attracting the attention of other traders and they pile in long for the big "breakout" trade. 

The longs are happy for a few minutes, but then a trading horror story is realized as prices plummet back into the trading range and the selling continues at a pace far more aggressive than the buying. The trader feels taken; caught by a whipsaw at an opportune level for the predators. Moreover, the trader likely incurred slippage on both entry and exit in the fast-moving market, making this trade twice as frustrating. Factor in transaction costs, and the scenario becomes even worse.

The real problem is that this happens very often, and traders mistakenly believe that this will change. As algorithms and black box trading becomes more prominent, it's likely the opposite will occur and these whipsaws will become even more prominent. Still, traders need to see this as an opportunity and not a detriment. In other words, each of us will need to be a predator from time to time, and capitalize on the market mistakes of others.

What Is the Danger Zone?
As previously explained, the danger zone is the area where large competing interests come together. It is the pivotal level that was moved through triggered orders in both long-term and short-term directions, including the scalpers that may be involved in the trade. This all normally happens within a confined space around the previous defined range (or pattern) after the stock breaks out. True breakouts and false breakouts will possess certain characteristics that can be analyzed and implemented in profitable strategies. 

Working the Zone
As with any strategy, this one is not 100% accurate, but by being informed we can capitalize on speculation-driven breakouts that have failed. The words "have failed" are used on purpose, since we are going to exhibit patience and wait for the market to signal us to enter in the opposite direction of the break. In fact, we are not going to trade in the danger zone at all.

What to Look For
In Figure 1 you will see an hourly chart of SPY, an easily accessible ETF that tracks the S&P 500 index. On three consecutive days, December 2, 3 and 4, we see the market make new highs, only to move quickly back into the established range (marked by the long horizontal lines). The false breakouts are labeled one 1, 2, 3 and the short horizontal lines show the breakout level of each progressive move.

Stock Market Trading System > New Online Day Traders Program - Stock Picking System

It\'s no secret that online trading can be a very lucrative, yet highly competitive field, and the truth is that the stock market doesn\'t care if you are an experienced or a beginner trader.

The rules and the opportunities are the same for everyone, so either you are going to make money when you pick a stock and make a trade or you are simply going to lose it in favor of the more seasoned ones.

It won\'t matter if we are in a recession or we have a great economy. Gamblers and ignorants loose money consistently either way. While experienced and Profitable traders make money in good or bad times. The trick is to learn how to do it.

As a stock trader your homework is all about studying and testing market strategies that can help you take advantage of stocks while at the same time protect your gains.

Just always keep in mind that a good strategy is simple and practical. Complicated stock systems will always make you slow in your decision making process or confuse you from the start.

A trader must always read as much as he can. There is simply no other way to prepare one self for this difficult yet incredibly rewarding activity, but to read and put into practice as much ideas as you can, at least by paper trading first.

The are a lot of books on the subject that pretend to help you, however many of them where written 6 or 8 years ago and that kind of makes them obsolete in this constantly changing field.

Fortunately there are some practical stock trading sites on the web where you can access proven trading strategies that are easy to implement.

They focus on stock trading methodologies that can help you identify and take advantage of certain stocks with momentum, while limiting your risk.

Momentum Trading System > Momentum Stock Selection - Traders Method

The stock market should present us with a wide variety of NEW hot stocks in 2009. Many of them are going to be new technology stocks that come from the nanotech, biotech, financial, energy, healthcare & communications sectors.

Most of them might seem promising, but the truth is that a good number of these trading & investing opportunities could be extremely risky, while others are simply not as good as they look. That's why it's very important to know how to choose among the best especially if you want to day trade them.

When you know how to pick and approach the best hot stock trading opportunities, you are able to generate a consistent and respectable amount of money in a very short period of time.

Experienced day traders recognize that trading hot stocks on momentum can be the fastest way to make money in the stock market, especially on uncertain times like these.

You don't necessarily have to trade momentum hot stocks all the time. But you can learn how to take advantage of them when you encounter the best opportunities for going long or for shorting them to make money when they are poised to fall down.

If You decide to day trade stocks just keep always in mind that for a trader to survive and be consistently profitable, its necessary to keep things as simple as possible. To much confusion and technical indicators will most of the time make you slow in your decisions and froze you up when a good opportunity is right in front of your screen.

In the end, stock market day trading is all about picking the best daily stock opportunities and following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

 

Day Trade Online > Breakout Stocks - Momentum Stocks - Trading Shares

In the stock market it's not impossible to watch a stock move up dramatically in a matter of hours or days. Investors and traders can make great money and fatten their wallets every time this happens.
This seems great for every one that wants to try their fortune in the stock market, but the problem is that if you don't know what stocks to look for and how to properly approach them you could end up wasting cash instead of making your profits grow. That's why the most important aspect of stock trading is the knowledge FILTER you employ to make your buy and sell decisions.
There are many "fantastic" stock systems and trading strategies out there, but you need to test them in order to discover which ones help you the most. That's part of your homework as a stock trader. Test, test and test again.
Complicated stock trading strategies that rely on a "boat load" of technical analysis indicators can make you slow, and being slow when trading stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner trader is to get information overload. It's better to go step by step, and test a practical stock trading strategy that can show you how to focus on concrete ways to make money while picking SOLID

trading opportunities once at a time.
In essence, You can be sure that the trading method you employ to approach the stock market and pick stocks can make a big difference in your results as a trader.

Fortunately some sites on the web can show you how to take advantage of stocks in a practical way every week by minimizing risks. One of those sites is Momentum

They focus on picking certain stocks that can generate excellent gains on the same day.

Visit them today and learn how to take advantage of the market by picking the hottest opportunities this season.

Stock Trading Basics > Learn How to Trade Stocks Online

The stock market should present us with a wide variety of NEW hot stocks in 2009. Many of them are going to be new technology stocks that come from the nanotech, biotech, financial, energy, healthcare & communications sectors.

Most of them might seem promising, but the truth is that a good number of these trading & investing opportunities could be extremely risky, while others are simply not as good as they look. That's why it's very important to know how to choose among the best especially if you want to day trade them.

When you know how to pick and approach the best hot stock trading opportunities, you are able to generate a consistent and respectable amount of money in a very short period of time.

Experienced day traders recognize that trading hot stocks on momentum can be the fastest way to make money in the stock market, especially on uncertain times like these.

You don't necessarily have to trade momentum hot stocks all the time. But you can learn how to take advantage of them when you encounter the best opportunities for going long or for shorting them to make money when they are poised to fall down.

If You decide to day trade stocks just keep always in mind that for a trader to survive and be consistently profitable, its necessary to keep things as simple as possible. To much confusion and technical indicators will most of the time make you slow in your decisions and froze you up when a good opportunity is right in front of your screen.

In the end, stock market day trading is all about picking the best daily stock opportunities and following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

Stock Market Books 2009 > Stock Day Trading E-book - How to Trade Stocks & Win?

Beginner traders often fantasize or wonder about how some people are able to achieve tremendous profits by trading stocks just a few hours on a daily or weekly basis.

So going farther than the hype & the bells and whistles that a lot of the called "trading gurus" like to invoke, the real "secrets" of the stock market game are enclosed within the trading set ups and market signals you rely on to decide how to CHOOSE stocks, as well as WHEN to BUY & when to SELL them, or even when to SHORT SELL those that are poised for a profitable fall.

So the clearer your set ups are, the faster you can spot a potentially profitable trading scenario and ACT ON IT reducing your risk.

Complicated technical systems and information overload can make you slow and confuse you right from the start, making you loose money instead of making your profits grow.

In essence, You can be sure that the trading method you employ to approach the stock market and pick stocks can make a big difference in your results as a trader. In order to succeed you will need to FOCUS on a set of simple trading strategies that you can implement without hesitation.

Fortunately some sites on the web do offer more effective and updated day trading methodologies. One of those sites that can show you how to take advantage of certain stocks on positive and negative momentum as well

They focus on momentum stock trading strategies, that are practical and easier to apply than many other technical systems out there.

Stock trading doesn't have to be complicated as many people perceive. But you do need to follow a well organized set of rules and tactics, that once you master them, you can aspire to replicate profitable trades with consistency.