First understand the chance-risk-ratio concept …

To identify low risk entry points you first have to understand the chance-risk-ratio. The concept is simple:

Possible profit / planned loss = chance-risk-ratio.

The possible profit is the money you will win if your trade works as expected. To get this number, you must subtract the target from your entry price. Example: $70 target – 50$ entry price = $20 profit.

The planned loss is the amount of money you are risking. It’s the difference between your entry price and stop loss. Example: $50 entry price – $45 stop loss = $5 planned loss or risk.

Now you have all you need. Here is your chance-risk-ratio:

$20 profit / $5 planned loss = 4.

If your trade reached the target, the return will be 4 times of your initial risk. That’s a good chance-risk-ratio.

Why is the chance-risk-ratio important?

You should only risk money if it’s attractive. Don’t place bets where you only get a small return. Of course it depends on the hit-rate but you want to calculate for the worst case.

If your hit-rate decreases, you need a higher chance-risk-ratio. Because it’s very difficult to maintain a high hit-rate over time, you want to consider this. Try to reach higher chance-risk-ration instead of having a high hit-rate. Then you have build-in a buffer for failure.

What’s a good chance-risk-ratio?

That depends on you and your trading style. If you are a long-term trader, you often have a higher average chance-risk-ratio. If you are a short-term trader, you mostly have a lower average chance-risk-ratio and a higher hit-rate.

The same is true for trading styles. Trend followers often have a high chance-risk-ratio because they are following a trade for a longer time. A swing trader often has a lower chance-risk-ratio because he works with targets.

I personally don’t work with targets. Instead I apply a more trend following style. If a trade will return 3-5 times my initial risk, it’s a good trade. My best trades will return 10-20 times my initial risk.

Paul Tudor Jones famously said, that he will at least aim for a 5 times chance-risk-ratio.

What’s low risk entry point?

It’s simple: The smaller your planned loss or initial risk, the lower is the risk at the entry point.

Don’t think that a trade with a low risk entry point has a smaller risk to fail. That’s nonsense. In the short term every trade has the same odds: 50%. It can be a winner or loser. Only over a large number of trades you will generate a hit-rate and edge.

Focus on trades where you can place a stop loss very close to the entry point. That’s only possible if you select an entry where you see quickly if your trade works or not.

3 examples of different entry points

How to select a valid stop loss level?

I could write a whole own blog post about selecting stop loss levels. But remember: A stop loss level should be your insurance. It should show you clearly that the trade is not working and you have to exit immediately.

I personally only select trades where my stop loss level is less than 7% away. Often I exit a trade or sell a portion of my position at a drop of less than 5%.

If I select a good entry at the right time, the price will never come back to my entry price. Therefore something must be wrong if a stock drops 5-7% after my entry. I give enough room for daily fluctuations but not for corrections!

A simple and clear entry signal and a technical level close to the entry price are important. I mostly use simple chat patterns like flags, triangles or multiple tested resistance lines. For a stop loss I used the last low or a moving average like 10 or 20. That’s it.

If a trade is not working, you can’t do anything. Get out and try it again at a later point. The more important thing is that you have a close stop loss. If the trade is working instead, you have a great chance-risk-ratio.

A low risk entry point needs discipline

If you select a value for your maximum stop loss level, you created a rule. Every rule needs discipline to apply it. If you don’t do that, the rules is worthless.

I personally stick to my rules. I never open a position where the stop loss level is more than 7-10% away. 10% is the maximum I only allow for very volatile stocks. If a stop loss is more than 10% away I skip the trade and wait for a better entry.

A low risk entry will not help you if you don’t have sound rules to select great stocks. You need rules to select potential winners which will generate a good chance-risk-ratio. If you created you rules for a maximum stop loss level, you can start to optimize your selection criteria for stocks. That will increase you hit rate over time.

Der Beitrag How to identify low risk entry points erschien zuerst auf Trading Blog - Julian Komar.

Huge profits don’t emerge from huge risk, they emerge from uncertainty. Millions of analysts analyze large and known companies like AT&T, Walmart or Apple. Of course those companies can grow and accelerate its growth, but often they will not disrupt markets (again). Because of this the potential is limited and the most CEOs try to smooth their stock prices to don’t scare investors.

What is a high potential or disruptive stock?

For me high potential means a potential for future surprises. A high potential company is mostly active in a sector with huge growth or a potentially bright future. There must be room for uncertainty that is filled by imaginations of investors and traders.

Disruptive can be high potential, but there is much more uncertainty. A disruptive company creates new markets, products or completely change them.

Most of those companies do not have any profits or a clear bright future. There are only imaginations by investors which drives the stock prices. It can be a startup which goes bankrupt the next day because their product failed or a company where a new drug is not approved.

High potential or disruptive sectors

If you want to find sectors with high potential you have to ask yourself: How will the world looks like in 3, 5 or 10 years? What are sectors which creates products which everyone will use future? Here are some examples:

• Medical: The developed countries have a demographic problem. This will help medical companies to create profits in future. In addition there will be new products, services and processes. The costs are exploding and new companies will help them to reduce.
• Internet: Common services will be replaced against internet based services. This touches every sector: Food, jobs, medical, banking and much more.
• Technology: You will find semiconductors in every product in future and every product is connected to each other. The Internet of Things will revolutionize every sector.
• Security: In the lasts years we saw a huge change of war tactics by terrorism. New companies and technologies will deliver the answer to this and help us to make the world more secure.

Examples of disruptive industries

The upper sectors are the most interesting for potential future growth. Inside these sectors we will find disruptive companies and industries:

• Biotech: This is one industry with a huge potential. Imagine what will happen if a company finds a cure for cancer or a therapy to extend peoples life.
• Medical cannabis: More and more companies created medicine with Cannabis. This is a complete new sector and helps to reduce costly normal cures.
• Machine learning and Artificial Intelligence: A lot of people know these buzz words. But this industry is currently at the starting point of a long journey. Machine learning will help us to create medicine, make our life more secure and creates new industries. Everyone can use such algorithms but it’s more important what a company does with it.
• Weapon detection: It’s the goal of our governments to make our life more secure. But you can’t control every pople at the metro or airport. A solution can be found in software and machine learning. Such a solution is fast and do not need a lot of security staff. You will see an example below.
• Blockchain: We don’t know if this technology will revolutionize industries or sectors. But there is a possibility that it will have a huge influence on the world trade and other markets. One thing I can say for sure: Known companies will not be the leader in this industry.
• Aerospace: Think about Space X and their mission. The space will be discovered one day and there will be companies which will develop revolutionary technologies for this. We need new rockets and space shuttles.

These are just a few new disruptive industries as examples. There are much more and sometimes they are hard to find.

Technicals are more important than fundamentals

If you analyze only fundamentals you will miss such companies. Mostly they do not have any earnings or sometimes they do not have sales. Because of this there is a high risk in such stocks. But if you look at the technicals of such companies you can find a next new leader.

A disruptive stock which explodes to the upside is telling the story: Capital is flowing into the stock and investors begin to believe the story behind the stock. That’s everything you need to know. You are not interested in the company itself, you are only interested in price moves.

Often a disruptive company surprises with news. Maybe a new technology finds first customers or is approved by an agency. Sometimes the whole company is bought by another one. Such news with drive the stock price higher and bringt a great profit.

Manage risk strictly

Companies which do not have earnings or sales are only driven by believes of investors. There is a huge risk that such a company will go bankrupt overnight or publish bad news. Because of this you have to manage risk more strictly than normal. Here are some tips:

• Be prepared for a 50% overnight gap. Example: If a biotech stock opens with a 50% gap and you have a 25% position, your loss is 12,5% of your whole capital. Make sure you limit your position size to 5-7,5% for biotech stocks.
• Never trade against the trend. If a disruptive stock is in a down trend, never trade them. That stock is not in focus of investors and traders. Only trade them in uptrends.
• Be prepared for higher volatility. Small caps and disruptive stocks can be more volatile. Make sure you don’t get stopped out with a 10% move against your position.
• Do not get crazy with disruptive stocks. If your disruptive stock shows a large profit you are maybe tempted to go all in. But that’s risky. Although you have a huge profit cushion there is a danger of bankruptcy or bad news. Limit your position size to 25-35% at maximum!

5 examples of disruptive stocks

Now you read a lot about what’s high potential or disruptive. The companies below creates disruptive product and you maybe never heard about them. But remember: A disruptive company means not that the stock chart looks great! Often it’s the opposite. But you want to monitor such stocks and one day the news is out and the stock is in focus. Then you are prepared to wait for a great setup!

$CRSP – CRISPR Therapeutics

Some of you maybe know this stock. It’s a biotech company which develops a revolutionary cure for cancer. The stock chart looks not bad and maybe a decent setup will appear soon.

$VUZI – VUZIX Corp

This company develops smart glasses. Think about what smart glasses can change in future: Maintaining machines, additional information in your daily life, entertainment … The stock charts looks really bad. But maybe one day a news is published and the stock explodes.

$SSTI – Shotspotter / $PTOTF – Patriot One Technology

Both companies are focused on new ways to detect weapons and shootings. The goal is to make our life more secure and they use machine learning to do this.

Shotspotter is focused on detecting shootings at universities and public areas. This is a technology every city and university is interested in! Maybe a story for high growth.

Patriot One is focused on detecting weapons and bombs. It uses software with machine learning and some hardware to do this. Imagine that every airport and metro station uses this technology. The stock charts looks not so good at the moment.

$WATT – Energous Corp.

Everyone knows wireless charging, but this company created a technology for real wireless charging. Go on their website and look at the videos! Every device is linked to each other and they are creating a huge network to charge their batteries. Imagine if you are taking the bus and your smartphone battery is loading automatically.

$WNDW – Solarwindow Technology

Solar technology is nothing new. But real solar windows are interesting and disruptive. The company is founded to develop this technology. The first customers are constructors of skyscrapers. They can use solar windows for the whole frontage of the building. But the stock chart looks really volatile.

I have some other companies for you: $IIPR, $TWMJF, $LUNA and $RKDA. Try to find out more about the companies and their stock charts.

Recommended books

Here is a small list of recommended trading books about this topic.

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Der Beitrag Disruptive stocks: 5 examples and trading tips erschien zuerst auf Trading Blog - Julian Komar.

I always try to combine 2 dimensions:

1. Technical strength and chart pattern.
2. Potential to surprise and create high demand.

Baozun – High potential China eCommerce stock

I never analyze fundamentals or try to interpret them. The reason: I believe that the fundamentals are always late and the price will move before. But I want to make sure that a stock has potential to surprise and attract money.

Baozun belongs to the China eCommerce sector. It’s a young company and the stock has only 2,5 years trading history. That’s good because the best price moves happens in the first few years of the stock. The reason is simple: The company is unknown and if it’s an attractive company, a lot of potential buyers are willing to buy. In addition a company will make an IPO if the fundamentals and growth are extraordinary good. So young stocks are always better than old stocks, where every detail is known and the company cannot surprise the market.

China is a huge growth market. It doesn’t matter how fast China growths. It’s only important that investors are interested in China stocks and see a bright future. That leads to increasing prices for stocks of that sector.

In addition Baozun is in the eCommerce sector. That is an additionally plus because this sector is growing fast and will revolutionize the traditional old retail sector. A company like Baozun can profit from that and maybe can grow faster than any other company. There is a huge potential for surprises.

You can see that Baozun has high potential: Growth from China, growth from internet sector. In addition the EPS growth is very high, also sales are increasing. The IBD rating for that stock is good.

Technical strength and potential

Now we come to the more important part in my opinion. A young stock with a high potential should trade on new all-time highs. Of course Baozun is doing that. Every new high is a new all-time high and there is no overhead resistance.

The stock rose 1200% from the low in August 2015 until today. Is this too high? No! Stocks with such a growth rate can reach much higher prices. Of course the P/E ratio with around 90 seems to be high, but the forward P/E ratio only reaches 26! I don’t work with P/E ratio, but you can see that there is a lot of potential to the upside as long as the company growths. Always have in mind that a stock can rise much, much higher if there is a high demand and a strong trend.

The trading volume of Baozun increases in May 2017. That shows that institutional money is flowing into the stock and the liquidity increased. Higher liquidity, a strong trend and good fundamentals means that more and more institutional traders will have that stock on their list.

I am not a big fan of price goals. I never use them. But I cannot see any reason why this stock should not go higher and trade at $100 or more.

The Baozun weekly chart

In the weekly chart you can see that this stock has not a long trading history. That’s good! Young and fresh stocks with less than 10 years trading history produces the strongest trends. You can see that if you go back in time in stocks like Apple, Amazon etc.

You can also see that the stock is trading at all-time high prices. That’s good, too! There is no one you needs to sell to close a past trading position at break-even. And there are no history prices which can be used as orientation marks for trader.

Look at the volume. It’s increasing which shows a higher interests in the stock. There are two big shakeouts which throw out all weak hands and leave room for new traders. In addition the volume is higher on strong weeks and lower in consolidation. That’s exactly what you want to see: Strong buyers and weak sellers.

Daily chart of Baozun

The daily chart shows perfectly the consolidation between September 2017 and February 2018. The trading volume dries up in that time which shows me that not a lot of stock holders are willing to sell. This is a good signs because the strong hands will hold their positions.

With the earnings in February 2018 the stock exploded and gapped up to a new all-time high. This is a very good sign. There is a lot of demand behind it! The buying continues the whole day and you can see the terrific trading volume at that day: 10 times the average 50 day volume!

Now the stock consolidates calmly and prepares the next move. When it’s time to enter? I don’t know, but you will see it if a new all-time high is printed with higher volume.

Of course don’t ignore other scenarios. The stock can gap down on bad news and destroy the whole chart situation. That’s why I only act if I see a strong breakout and new buying pressure.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”B0755Y5LCZ,0071494715,0071614133″]

Der Beitrag Baozun ($BZUN) chart analysis – China eCommerce stock erschien zuerst auf Trading Blog - Julian Komar.

If you do some research, you will quickly find out that all famous discretionary traders used volume: Livermore, Darvas, O’Neil and many more. But famous today’s traders use volume information, too: Minervini, Zanger, Ryan …

1. Volume shows greed and fear

The trading volume can give you clues about the greed and fear in a stock or any other trading instrument. An example of this trade model can be found on this BTC to USD website, live.

• If the volume is high on up-days it shows greed. Traders are heavily buying the stock and absorb all possible selling volume.
• If the volume is high on down-days people are fearfully. They sell a lot of stocks and throw their trading positions out of the window.

You can easily determine which side is in control if you look at the volume action. But the volume must be in synch with the price action.

2. Price and volume must be in synch

The best way to interpret volume is to look at the price simultaneously. Huge volume and huge price moves shows clearly which side is in control: Buyers or sellers.

If you see small price moves with high volume, you should be sceptical. Why? Because volume should be in synch with price! If this is not the case, volume should be seen as a warning sign. Maybe somebody is selling into strength or buying falling prices heavily.

Small moves and huge volume is NOT a selling signal, but you should monitor the stock closer.

3. Volume and small caps

Stocks with small trading volume are much more difficult to analyze. Sometimes there is one good volume day, but the other day the stock is crashing on low volume. This happens because there are not enough traders which trades the stock.

If only one mutual fund wants to buy a position in a smaller stock, there is not enough buying power for big trends. As soon as the mutual fund completed the position, the price and volume collapse.

A solution is to wait until there is enough interest and volume in the stock.

4. Everyone can see “monster volume”

You will not believe it, but there are traders out there which buys a ton of stocks in a second without looking at the price. Why? Because it’s their job! If a fund wants to buy a position and makes only money by fees, they can buy without looking at the price. In that situation a stock can explode to the upside with high volume.

Everyone can see “monster volume” in the chart. A 5x, 7x, 10x or 20 times the average volume is clearly visible and shows high demand or selling pressure. If you do some research, you will see that the most powerful trends started with more than 10 times the average volume. Screen for such situations and put the stocks on your watchlist.

5. Excessive volume

Volume is good, but too much volume can be a problem. It’s like a motor which is out of control …

In some special situations all outstanding shares are trades multiple times per day in a stock. That shows a high focus of all traders on that stock. And if a stock is highly in focus and everyone knows about it, there will not be enough buyers left. It maybe will work for some days or weeks, but then the stock has no fuel left and collapse.

6. One day wonders

Besides excessive volume there is another type which I call “one day wonders“. A stock explodes to the upside with huge volume and price action. The next day the stock is doing like if nothing happened: No volume, no price action anymore.

Such situations should make you sceptical. If that stock is the best stock in the world, where are the buyers? Maybe there was just one buyer and you. Normally such a stock will return to the level before the huge price move or collapse if no one is there to support higher prices.

7. Volume in ETFs

ETFs and volume is a different thing as stocks and volume. The reason is that ETFs are based on price movements of a basket of stocks. Even the ETF is traded on piece a day, it can explode to the upside. The underlying stocks determines the price movement of the ETF.

But the volume of an ETF can give you clues about the demand of the ETF or sector. If a sector ETF is traded with high volume, it can show you that the whole sector is on demand.

Of course this is not true in every situation. Sometimes there are large short-sellers in ETFs which hedges their portfolios.

8. Options expiration

A lot stocks are traded by options, too. You know that options have an expiration day. On that day, options are exercised and the option holder has to deliver.

The trading volume is very high on such a day, but price movement can be “normal”. You should know these days and ignore it. Of course this effect can have implications on a stock or the price move, but normally this is just intraday.

9. You don’t see all volume

Today there are a lot of ways to trade stocks. Especially market participants with huge volume uses different stock exchanges as you and I. There are market like OTC, Dark Pools or ECNs. The volume of such exchanges is normally added to the main volume after close.

10. Volume on news and earnings

News and earning reports can influence prices heavily. Sometimes this can be good for you and sometimes bad. But you should watch price and volume closely on such days.

If there is a great earnings report and nobody reacts with price and volume action, you should be sceptical. On the other side, if the market reacts strongly I can give you a clue that maybe more price and volume action will follow.

You must always have in mind that huge and smart market participants are not willing to buy their whole position in one day.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0471668265,0735201811,1118443926″]

Der Beitrag 10 tips to work with trading volume erschien zuerst auf Trading Blog - Julian Komar.

For a lot of people it goes against their beliefs to buy new highs. Why? Because the stock seems to be expensive in that moment. But the stock market works not like a supermarket. Cheap stocks are mostly not a bargain, they are rotten eggs.

The most persuading argument for me to buy a stock on a new all-time high is: What must a stock do if it should move up 10.000% in a row? Answer: It must take out old highs and reach new highs.

Example: Amazon – New highs are buying opportunities

Amazon is one of the most successful stocks in the last years. I put a simple 52 week high line (with a Donchian Channel) on the chart. You can see clearly that every 52 week high was a buy opportunity.

Of course the stock had some seriously corrections, but that’s why you need a trading system with risk management and not only one indicator.

There are plenty of similar charts next to Amazon like Apple, Netflix, Nvdia and many more. All these super stocks have in common that they continuously reaching new 52 week highs and especially all-time highs.

The difference between a 52 week high and an all-time high: Overhead resistance

Not in all cases is there a difference between a 52 week high and an all-time high. Because if a stock is priced on an all-time high, it is automatically a 52 week high. The only difference is “overhead resistance“.

With overhead resistance I mean all potential seller that would sell a stock at higher prices. These traders had bought a stock at a higher price and now their trading positions show a loss. If the price returns now to a higher price they maybe close their position for break-even. The problem is that a seller is a seller and they are able to stop a price move.

If a stock is priced on an all-time high, the stock has “blue sky potential“. That means every trader has a position that shows a profit. No one is urged to sell because the trading position hurts.

But there are situations where the overhead resistance is absorbed by other traders. In these situations the stock quickly moves to new highs and afterwards maybe to new all-time highs.

All-time high trends lasting longer as you think

A stock with “blue sky potential” can trend longer as you think. If there is no serious selling pressure, the stock can move a long time until it hits resistance.

Stocks on new all-time highs have no technical resistance because there is no trading history. A trader cannot look back and search for important price barriers other similar. The only situation where an all-time high stock can reverse is if the bias in the stock changes. This normally takes a longer time and is caused by bad news.

You will see a change in an all-time high stock quickly. Normally it is gapping down or moves quickly to the downside. In that situation new overhead-resistance is created.

But if there is no bad news or anything similar, the stock can move much longer as you think.

Bull markets and new highs

Of course all upper examples are selected in hindsight. But normally bull markets produces a lot of similar examples.

It’s not possible to catch every superstock but you may ask yourself: Where do I want to fish?

• Do I want to fish in a sea with small, stinky fishes and where my odds are bad to fish a big one?
• Or do I want to fish in a sea where some really big fishes are swimming.

I prefer the last one.

So you can see that the important question is about the odds. That’s what stock selection is about. If you combine multiple criteria, the odds will increase and you maybe fish a really big fish out of the sea of stocks.

Should I trade in the weekly chart because of 52 week highs?

You can do it if weekly charts are your preferred time-frame. But it’s not necessary. I personally prefer the daily chart. And you should not blindly use a 52 week high as a trading signal.

The upper examples should give you an idea about stock selection. It’s much easier to trade a stock on a new all-time high. The selection is easier because the stocks are obviously visible, there is no overhead-resistance, often smooth trends emerge and the moves to the up-side are faster. That’s why I look for stocks on new all-time highs.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0071494715,0071614133,0071807225″]

Der Beitrag Buy high – sell higher: What must a stock do to rise 10.000%? erschien zuerst auf Trading Blog - Julian Komar.

How can we analyze the markets without a too big influence of our emotions? We look at price charts.

Price charts telling us everything we must know:

• The direction (up, down, sideways).
• The strength of a move (volume).
• The highest odds for the next move (continuation of the current trend).

OK, let’s look at the markets from a higher time-frame. The higher time-frame tunes out the noise of daily fluctuations. This makes it easier to see what’s really going on.

S&P 500 – Strong bull market with pauses

There is a clear bull market in S&P 500 stocks. The price is moving up and the last weeks the move accelerated.

This week the down move wiped out two weeks of strong gains. In addition the volume was higher, but not excessive.

Is it a top now? We don’t know. But the odds that the trend will continue are higher. Maybe there will be a pause for some weeks or months. If the price prints a new all-time high it is a clear sign that the trend continues. Until that it is likely that the market will take a pause.

The bearish scenario is far away. Of course the market can crash, but it’s not very likely. If you look back in the charts, you will see that a real market top needs weeks and months to build.

Nasdaq – Smooth up-trend with consolidations

The Nasdaq shows the same picture: Strong up-trend with acceleration. Now the price moved down for a week and maybe started a new consolidation.

You can see a similar pattern in April to June last year. There was a strong down week and a bull flag pattern. After the price reached the weekly 20 EMA (~100 daily EMA), the trend continued.

The only thing what catches my attention is the volume. It’s very strong during down-moves. But the strong volume is not accompanied by price movement. Maybe there are other reasons for that. In addition it’s a sign that the high volume is absorbed by the market participants.

If you look at the chart, does it looks like a top? No! It’s currently far away from that.

Russell 2000 – The weakest index

I mostly trade small and mid cap stocks. That’s why I pay a lot of attention to the Russell 2000 index. You can see in the chart that this index is much more volatile than the big cap indices. That makes it more difficult to trade.

But the overall picture is clear bullish. There are higher lows and higher highs. And that is by definition an up-trend.

As long as the Russell 2000 trades above the last big consolidation phase in August 2016 to July 2017, everything is ok. If the price moves below $143 ($IWM) it will be a first warning sign. But we are far away from that.

The violation of the last high this week is not a good sign. But it’s still not a trend reversal. It just say that the volatility will continue.

You can see that a look in the weekly chart gives you a much clearer picture. If you look into the daily charts instead, you will see much more volatility. The bigger picture can give you more confidence and objectivity.

T-BOND – A new trend arrived in bonds and interest rates

For me the bonds are currently a very interesting market. Why? They starting a new down-trend. If you look at the 2 year, 5 year or 10 year note, you will see that they move much faster as the 30 year T-Bond.

Yes, maybe the new trend has to do with the FED politics. But the reason is not important. As Paul Tudor Jones famously said: “… It’s your job as a trader to buy what’s going up and to sell what’s going down …”.

The chart tells you everything you must know:

• Head and should pattern is a sign for a trend change.
• There is already a down-trend in place.
• All moving averages are aligned in a bearish fashion.
• The volume increases with the price down-move.
• The last lows are taken out and the trend continues.

There are several possibilities to profit from that new trend. For example you can buy an inverse ETF or trade the future directly.

Gold – Waiting for a decision

The last weeks showed a strong up-move in gold. But if you look at the weekly chart, you can see quickly that’s just a move in a consolidation.

If you want to make big profits you need the upper timeframes behind you. If the upper timeframe is in a consolidation, the lower timeframes mostly are volatile.

You don’t want to trade a market in a consolidation. There can be quick reversals and high volatility. You only want to trade markets in a clear trend which is supported by institutions (smart money). Why? They move the markets and start/support huge trends. If they are not interested in a specific market, you can se it by low volume. As soon as they rush into the market, the volume will pick up and the price moves stronger.

Back to gold. They will be a decision: Breakout or breakdown. Do not anticipate! Wait instead until the chart and volume speaks.

Crude oil – Energy markets in a bull run

The last weeks Crude oil showed a nice up-move. Before the up-move started there was a one year sideway bottom consolidation. You can see the head and shoulders formation which is a sign for a trend reversal.

But if you look at the monthly chart, everything looks different. The current up-move is just a small fluctuation in a down-trend. There can be sharp reversals and set backs. But the opposite it also true. There can be up-trends which lasts weeks and you can profit from them.

I like that the last up-move showed low volatility. It’s a good sign and the market participants show no doubts. We will see how long the up-move will go on.

US-Dollar – New down-move started

The US-Dollar future is mostly the same as the forex pair USD/EUR (or EUR/USD). And yes, there are correlations to Crude oil and gold. But it’s a very interesting market at the moment.

I always try to get into new trends. New trends shows mostly a stronger move because everyone tries to get in and that gives the trend new fuel.

US-Dollar is breaking down from a long top. You can see the first down leg in the chart picture. Now the second leg has started. The odds are high that the down trend will stay for some time.

There are several instruments to profit from this trend: Futures, options, ETFs, forex or the money market itself.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0735200661,0735201447,007147871X”]

Der Beitrag Market overview: Stock market, Bonds, Oil, Gold, US-Dollar erschien zuerst auf Trading Blog - Julian Komar.

Yes, I also spend a big portion of my time to find setups. But the methods stay the same. In the past I developed multiple ways to screen the market for interesting setups. Today I only seldom adjust the programming codes.

Do you have to be a programmer to find good setups? I don’t think so. Programming knowledge will help you and you should learn to program, but there are many other ways to discover great trading setups. I will show you 3 …

3 easy ways to discover great momentum trading setups

Here are some simple ways to look for great momentum trading setups. The methods are not complex or science and the tool I use is free!

Looking at biggest winners today/week/year

Momentum stocks have one in common: They are rising fast. So you can use the top gainer lists to look for setups.

I mostly look at these criteria at Finviz:

1. Stocks that moved more than 5% today. These are really strong movers and you maybe want to take some of them on your watchlist.
2. 10% week winners: Here are stocks included that moved more than 10% a week. Mostly strong momentum moves starts with a strong move over a few days. I go trough all stocks in a Finviz chart gallery and maybe add some to my watchlists.
3. Strongest stocks for 1 year: You will make the discovery that all the leading stocks are the most strong movers over 1 year. They always appear on the lists. Why? Because there is a great demand and they are making continuously new all-time highs.

Strongest mover from 52 week low

Another method I use is to look at the strongest movers from their 52 week low. The reason is simple: Good performing momentum stocks hold their acceleration. That means that the distance between the current price and the 52 week low will be the same or getting bigger.

In Finviz you can sort all stocks by their distance from the 52 week low. I normally use a minimum of 70%. That means all stocks should be at minimum 70% away from their 52 week low.

Unusual or high relative volume

I want to find stocks that not only show momentum but strong volume, too. My biggest winners all started with a huge volume. Sometimes 5 or 10 times the average volume.

Here are two ways to find strong volume movers:

• Unsual volume: That is a signal filter in Finviz. It shows you all stocks where the volume is strongly above average. Sometimes here you can find interesting candidates for a watchlist.
• Strong relative volume: This is almost the same, but you can choose your own setting. I run a Finviz filter multiple times per trading session. For my filter I use the value 1.5, which means that I want to see only stocks with at least 1.5 above average volume.

Keep it simple to find good momentum setups

Yes, I run also more complex screeners. But they all come down to two things: Movement and volume. In all screeners I combine different filters. You can do it in Finviz, too.

I sometimes think about to give up my complex screeners and switch to the simpler ones. The more simple the better you can follow your routines.

The upper filters and screeners are good to start with. Especially for beginers. You must find a simple routine and follow it. If you did it for a while, you build up trust and you know what you are looking for.

Filters and screeners help you to focus more on price- and volume-behavior. They are not a trading system, they are just a tool to make the process easier for you.

Although I have multiple screeners running, I went through hundreds of charts per day! In a week I maybe see 2500 or more charts. Some of them I see every day. If I had no routine, screener or filter, I would not be able to do this.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0996307923″]

[amazon box=”0071807225,0071614133″]

Der Beitrag 3 easy ways to find momentum stocks with Finviz erschien zuerst auf Trading Blog - Julian Komar.