4 Technical Indicators That Every Day Trader Should Know

Trading is one of the most complex, challenging and intimidating professions in the world. On the one hand, you have so many sources of information available that it is impossible to absorb it all.

On the other hand, even with all this information available to you, every single trade you make will still contain an element of uncertainty.

Fortunately there are a few key sources of information that are always relevant for any trade that you make. Here are 4 top technical indicators that will help you to make smarter trades every single time.

Relative Volume

Relative volume compares the current trading volume to the average volume for the same time of day. It is displayed as a ratio. For example, if a stock is currently trading at 5 times its average volume for that time of day, then the relative volume would be 5.

Relative volume is an indicator of how much action a stock has seen so far that day. A score of less than 1 means that the stock is moving slowly compared to most other days, which indicates that it is not a great candidate for trading on that day.

A score of 2 or more indicates a lot of interest, and means that there is a good chance for a significant price move which is what day trader want. You can also use relative volume to help you determine the size of your position.

The higher the relative volume, the more “in-play” a stock is and the greater the chance of a significant move.

Time & Sales

Time and sales is an indicator that displays all the trades that have been executed, along with the time and size of each trade. A green print indicates a trade executing on the ask price, and a red print indicates a trade executing at the bid price. White prints are for trades that cleared between the bid and ask.

Time and sales shows the number of shares being executed at which price, which offers insight into the current aggressiveness of traders. This indicator is excellent for helping you to choose entry and exit points for each trade and identifying likely pivots in price.

You will often notice a swift acceleration of trading volumes as you approach likely pivot points, which means that there is a good chance that prices will quickly reverse.

It takes a bit of practice to get a feel for using the time and sales indicator, but it is an essential component of any informed trade.

Volume Weighted Average Price

Volume weighted average price, or VWAP, is a technical indicator calculated by finding the total value of all shares bought in a day (each share traded multiplied by the price of the trade), and then dividing that number by the total number of shares traded that day. The result is an average price based on the weight of volumes traded at different prices.

This indicator is ideal for identifying good prices to enter and exit a position. The opening and closing prices of a stock may be a poor indicator of the true demand and supply for that security.

VWAP helps to bring additional context to a stock’s price by showing the average price where significant trades are actually being made.

Level 2

Level 1 indicators is the current bid/ask quote for a stock. Going one step further, Level 2 displays price quotes at each price level and the name of the market maker that is holding the order.

It is crucial to remember that every disappearing order does not indicate that it was necessarily filled. Market makers can pull their orders at any time, and Level 2 just displays open orders.

The information that Level 2 provides is very important for every trade. This information allows you to identify points of significant price support that the simple bid/ask spread provides no indication of.

In essence, Level 2 allows a preview of the kind of trade volume that you can expect at different prices as the bid/ask spread moves into that price region.

3 Ways To Tell If  Stock Is Bottoming

Traders and investors well versed with the business know that it’s better to purchase assets (stocks, options and ETFs) after they decline rather than when they have risen. Buying assets when they are priced low may seem like a wise strategy because you think profits are just around the corner.

One thing you need to remember when buying low is to be cautious. If you buy a stock after it has experienced substantial decline and believe the present conditions will lead to its decline further, abort the trade.

Bottom in day trading refers to the lowest price reached by a commodity or index within a given period of time. The time frame can be a year, month or intraday. In order to determine the future price of a stock, option or index, analysts usually determine the bottom of a particular security.

The history of a stock’s price movement and trading volume is used to know future prices of securities. Analysts believe that price movements are trends and not random occurrences. Dozens of price patterns help to decide if a stock should be bought or sold.

Here are the technical aspects of a stock bottoming.

Look For Increased Volume

As an investor or trader, there are clues you can use to determine if a stock is nearing a point bottom. Majority of analysts’ reason that stock prices and relative volume are the two most important indicators. According to analysts, securities tend to bottom when few sellers are available for a particular stock. When few sellers exist, more buyers remain and if the buyers will be willing to pay a higher price, it means the price bottom will have formed.

What you need to know is that stock volume adds credibility to stock prices and price direction. This means that the higher the volume of stock bottom, the stock will not experience lower prices in the near future. For stocks to bottom, they have reached the inflection point.

The inflection point refers to an event that changes the progress of a company, economy or geopolitical situation. It is the turning point after a dramatic change where positive and negative results are expected. Inflection points are significant and its effects are well known and widespread.

It is also where the direction of a curve deflects as a result of an event. So, if fewer sellers exist selling at lower prices, people will be looking to sell high and if buyers remain, the prices of the securities will rise.

Look For Prices To Reclaim Moving Averages

Moving averages help to smooth out price data forming trend following indicators. They don’t predict price direction. They define current direction with a lag. Despite the phenomenon of lag, moving averages help to smooth out price and filter our noises. There are two popular types of moving averages.

a. Simple moving average
b .Exponential moving average

Simple moving average is usually formed when the computing average price of a stock is over a number of periods. Since simple moving average is based on closing prices, a 5 day simple moving average is calculated as the sum of five days divided by five.

Exponential moving average is formulated to reduce the lag. It achieves this by applying more weight on recent prices. Three steps are involved when it comes to calculating EMA. The calculation begins with the simple moving average which should be in the previous period as the EMA. The calculation proceeds with weighting multiplier finally concluding with EMA calculation.

As said earlier, identifying trends is a key factor of moving averages. It is used by most traders who want to make the trend their friend. When it comes to stock bottoming, traders have a higher chance of success by considering prices to sell high. One way of doing so is by using short term moving averages of 9 to 20 EMAs.

Confirm With Major Indicators

The Moving Average Convergence/Divergence oscillator or MACD was developed by Gerald Appel in the late seventies. It is one of the simplest and most effective momentum indicators. It helps turn two trend following indicators into a momentum oscillator. MACD achieves this by subtracting the longer moving average from the shorter moving average. This means MACD ends up providing the best of both worlds: trend following and momentum.

When it comes to stock bottoming, MACD and RSI are great indicators. MACD is known to fluctuate above and below the zero line. Relative Strength Index (RSI) is an indicator developed by Welles Wilder. It helps to compare the magnitude of recent gains and losses. Using both indicators, traders can turn from oversold conditions and start heading up.

Look For a Higher Low

In trading, there is no crystal ball to reveal to you when the prices are right to buy or sell. The only way to ensure that traders have made wise decisions is by implementing sound strategies. One of those strategies is putting in a higher low from previous low when it comes to stock bottoming. This will help to avoid buying into securities that are falling. Going against the grain is a strategy many traders feel works well when it comes to stock bottoming. As a trader or investor, it’s worth your time to read the signs and get to avoid losses.

Bottom line

Every investor wants to know when prices are about to make major changes in any direction that is top or bottom. By looking for major indicators like MACD and RSI or for increased stock volume, traders and investors alike can determine stock bottoming clearly. Furthermore, it will make you a more successful trader or investor.

How George Soros Became So Legendary

There are few investors on this planet that have not heard of George Soros at all. He is a lightening rod of controversy for some and admiration for others. There is basically no in between. This is largely because of the interesting ways in which he has made his money and also because of the political actions he takes with that money.

George Soros made one of the most famous trades ever back in 1992 when he made a huge bet against the British Pound which netted him $1 billion in profit in just 24 hours. It was probably the quickest billion dollars anyone has ever made and one of the most famous trades ever taken, which later became known as “breaking the Bank of England”.

At the same time, it was a huge bet which just as easily could have gone against him but if you want to make the big bucks you have to risk big bucks. It was definitely a gambler’s move, and not something that would be recommended for just your casual investor. Despite this, Soros made out like a bandit and has only continued to grow his net worth averaging over 26% for the past 41 years. In fact, if you would have invested $10,000 with Soros back when he started in 1969, it would be worth over $143 million!

Why Is Soros So Controversial?

George Soros certainly draws enough criticism from the public. This happens as a result of his liberal political outlook and the fact that he backs liberal causes all throughout the world with large amounts of money. Most recently, George Soros was involved with giving $25 million dollars to the Hillary Clinton for President campaign as well as other Democrats running for office in this most recent election. This particular investment did not pay off, but Soros drew ire from the political Right regardless.

The billionaire has also been active in working on the Syrian refugee crisis. He has tried to work with European countries and others to resettle those who are escaping the brutal civil war in Syria. He considers this a humanitarian crisis and wants to do what he can to prevent people from suffering more than they have to. Of course, even this is something that draws scorn from some people who disagree with such actions.

In Retirement But Still Picking Stocks

Soros has officially declared that he is retired from the day to day stock picking that he once did for his funds. He has more than enough money to last the rest of his lifetime as well as the lives of his children and their children and their children and so on. As a result, he spends more of his time working on the political and charity causes.

The fund still continues to select investments and gather new investor’s money for its operations. Some recent changes to the fund included purchasing up Tivo shares and massively reducing shares of Dish Network. This could be indicative of a move that goes to show that Soros and his investment funds believe that the world of technology is moving towards a different way of how we use our technology.

The fund has sold out of a lot of its gold positions, but Amazon is getting a lot of love from them. It is great to see because all of this information is available to even people who are not invested in the Soros funds. The information is a little delayed compared to when the trades are actually made, but it is still valuable insight nonetheless.

Although his ways may be controversial to some, there is no question that George Soros is one of the savviest investors in the history of the world. He knows what he is doing, and his results speak for themselves.

3 Reason Why Investing In Trading Education Is Important

Let’s begin with an intimidating, though very real, truth: trading did not get to be such a lucrative endeavor by being a straightforward practice. While the concept itself is easy to understand, the millions of intricacies involved in smart, successful trades aren’t something that can be casually picked up.

Trading isn’t a paint-by-numbers undertaking, either – there’s no such thing as a ‘one true way’ when it comes to trading. The best way to approach it as a newcomer, or even as an experienced trader looking to hone their skills, is to absorb research and listen to several expert opinions as part of that research.

Still not sure where to start? Here are the three core concepts for trading education that seasoned, consistent traders follow to stay on top market fluctuations.

Get a Mentor

The best asset to your trading is having a knowledgeable mentor in your corner. Even the most well-written book or well-structured online trading course can only cover so many contingencies! When you run into a unique scenario and money -your money – is on the line, why gamble when you could ask someone more experience for help?

A mentor can ensure that your trading practices get off on the right foot, as well. If you develop bad habits or emotional triggers early on in your trading career, it’s going to be that much harder to “shake” them later on. Remember: your mentor has likely had the same fears, the same apprehensions and the same mistakes under their belt – learn from their mistakes and the student might even surpass the teacher, in time.

Understand What You’re Doing

We’re all guilty of coasting somewhere in life – getting the “gist” of something and just letting inertia carry you to a result. Trading, however, is not a High School literature test – it’s an important structure of rules, probabilities and information that could make you a lot of money. It’s not enough to know that cause A affects company B, you’ll need to know why that affect changes things in order to be a knowledgeable trader.Are industry trading magazines, blogs and corporate research efforts a little dry at times? They certainly can be. That doesn’t mean they aren’t important as part of a holistic trading approach. Taking online trading courses may come with an upfront cost, but what they offer in structure and support is priceless. In addition to the course materials, you’ll get access to a community of fellow traders, which will allow you to clarify ideas and discuss strategies with other traders at your level.

When it comes to pre-made trading blueprints, following – not blindly following or copying, but keeping an eye on – certain systems will help keep concepts fresh in your mind and promote understanding. That brings us to our final point…

Forge Your Own Trading Path

The beginning trader could throw a stone and hit a dozen sources that claim they’ve “cracked the code” for 100% successful trading. Not only is that statistically improbable, it’s made to appeal to lazy traders that aren’t willing to put in the work to succeed. No matter how “foolproof” a trading system seems, always filter it through your mentor and your own trading research to ensure it’s worth pursuing.

An old saying also holds true, here: don’t count your chickens before they’re hatched. While it’s important to get comfortable with risk in trading, don’t bet the farm when you’re still learning the ropes. As you practice your trades and build confidence in your methods, success will follow naturally.