Day and swing trade like a pro.

Stochastic patterns

24SP is the only trading material that reveals thirteen exact stochastic forms.

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Day traders, swing traders, and hedge funds make use of the stochastics, but some favour technical indicators such as the RSI, MACD or the momentum indicator itself.  These are technical indicators. 

Aside from these trading tools, there are patterns.  Active traders utilize chart patterns, Elliott wave structures, Fibonacci structures and market patterns.  Note that market structures command all other patterns. 

  Professional traders always align all other forms with the market forms to realize consistent winning trades, but they also follow the three stepladder to master day trading and swing trading.

 

 

 

Step one:  uncover a convincing or a high prospect trade set up on a higher time frame (long term view)

Step 2:  await a valid trading signal on a medium time frame (intermediate view)

Step 3:  enter the trade on a lower time frame at a small risk entry point (short term or immediate view)

Professionals also use structures to foretell or to estimate what the price is likely to do.  Intelligent market participants do not press these forecasts onto the market.  They wait and will only put into effect their trading plan when market conditions are most promising.

A short time ago, we have published 24SP, a trading material on the subject of stochastic patterns.  Though many thought they already grasp and understand everything concerning the stochastics, the opposite is true.

Traders knew on average 25% of these forms but have never seen or known about the other 75%.  After spending months and years analysing the stochastic indicator, we have exposed thirteen detailed blueprints.  They are consistent and fractal.  They are noticeable on all time frames; they are also recognizable to traders who are aware of them.  They present reliable trade set ups.

With no reliable trade set up, there is no winning trade.  Make a note of it and avoid this trading fault from today.

What can one do?

There are few things traders can do such as:

Select a blueprint, study it, examine it, retest it and be acquainted with it.  I would say take time to master it.  To master a pattern is to grasp it and be able to filter out false models.  In another word, be able to know when and where does the pattern form, but also how does it build up.

Subsequently, train your eyes to detect it even if it is hidden or distorted to a certain degree.

Screen for financial instruments that exhibit the set up.

Wait for a signal in a promising market environment by adhering to the trading triangle.

Take the signal only at a low risk entry point if it offers an adequate risk-reward ratio.  Be selective and defensive.

Stochastics

This is a truly well-liked indicator that permits traders to detect the position of the closing price in relation to prices range.  For instance, when the (8, 3, 3) rises above 75; it is demonstrating that the price has closed in the higher end of the last eight candles.  Conversely, if it drops below 25, it signals that the price has closed near the lower end of the most recent eight candles.

This is constant on all time frames.  Note that in the uptrend, a financial instrument will repeatedly close near the higher end, but will often settle on or near the lower part in a declining market.  In addition to these warnings, the stochastic indicator can detect bullish or bearish divergence.  We will examine divergences in an additional article.  The indicator also mimics and smoothes the price like moving averages to filter out market noise, volatility or exaggerations.  Throughout this process, George Lanes oscillator consistently displays thirteen distinctive patterns.  There are both bearish and bullish structures.  They allow traders to anticipate a definite price action.  Among them, two are complex and require immense attention.

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Picture on the left hand side is the daily chart: Dollar-Japanese Yen currency pair (USDJPY).  Notice that on the 2nd June 2013, a specific stochastic pattern occurred.  The price was around 9700.  Within two weeks,  it rose to 10300.  This is a typical bullish stochastic structure. 

Though ordinary traders can only see the oversold signal, astute stochastic traders have a better understanding.  Advanced swing traders who use TSTW SYS 008 will wait for a signal and enter the trade at a low risk point.  

One must actively manage the trade, to avoid turning a winning trade into a loser.  It is also essential to monitor the economic news.  Note that the price did not go up in a straight line.  There were corrections along the way, but steadily it reaches a higher price.  One does not have to take every trade if there are other conflicting warnings or risks.  I did not take this trade because I believed the price was due to pull back to form the overdue second wave on the weekly chart. 

How to apply these patterns?

Alike Elliott wave blueprints or Fibonacci structures, they present the best trading opportunities.

Traders who figure out how to use a top down trading approach will actively search for these set ups.  For example, when one sees a slow stochastic model on the weekly chart, one will not enter the trade straight away on the same time frame.  This is a common high risk trading error unless one is adhering to a viable risks management.  The second step in a regular condition is to look for a trading signal on the lower time frames (for instance on the two hours chart).

If a compelling signal occurs on the two hours chart (this an example only), one will select

a low risk entry point on the ten minutes time frame (this for illustration purposes).

The example above is to present to market players, what a top down trading involves.  However, this illustration is not a ready to use top down trading method.   Note that, one should also integrate the trading triangle to avoid fighting the market.

From a different perspective, if one wants to catch an impulsive wave, one must first learn to recognize all corrective waves.  An impulsive wave follows a corrective wave.  In a normal circumstance, when one notices a corrective wave, one can anticipate an impulsive wave provided that one aligns with the correct market pattern.  Equally, if one encounters a viable structure, one will expect a definite reaction.  Nevertheless, one will always apply a multi time frames trading approach to capitalize on the current trading opportunity.  A fluent Elliott wave trader will anticipate the beginning of the third wave if the second wave is a legitimate zigzag after an impulsive wave provided that the fundamentals (using Google finance or Yahoo finance) are robust (in a positive market environment).

Day trading and stochastic patterns

The thirteen explicit structures are also useful for day trading.  For instance, if an agile day trader detects a structure at the right place on the four hours chart, he or she may switch to the fifteen minutes chart, and wait for a signal.  However, the entry time frame should differ from the fifteen minutes period (preferably the five or three minutes period).  This is only a suggestion.

Furthermore, the biggest day trading mistake is to make a trading decision on a single time frame.

Traders must also know where are the key support and resistance levels. Trading errors such as taking a bullish signal right below a resistance level or a bearish signal right above a key support level will not help..  If a bullish signal is right below a significant resistance level, traders must allow the price to rise above it, retest it and turn around.  Vice versa for bearish signals that occurs right above a support level.

When a bullish structure becomes available at a compelling support level, traders must stay focused.  They will also check the fundamentals and apply the trading triangle instead of just placing the trade.

Moreover, it is essential that market participants combine technical trading with the fundamental analysis (Google finance. Yahoo finance and Forex factory ) to keep away from losing consistently.

The stochastics’ structures are very useful, but one must not overlook the economic news which can instantaneously alter the market sentiment.  It is not because one has located a stochastic pattern that one must straight away place a trade.  It is prudent to consider the return to risk ratio and the market environment.  24SP is one of  the valuable trading tools for both swing trade and day trade.