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Using the daily Market
Commentaries for Short-Term Trading
The following method is
geared to active, short-term traders who wish to trade index
derivatives and make approximately 5 -10 trades per week.
Our daily Market Outlook can be used as a confirmatory tool to
fine-tune your short-term trades, but we strongly suggest that
active traders also learn to analyze the market on the fly.
Making money with "Market Stage" (one of
the daily Market Outlook'' permanent sections):
- The main purpose of
our real-time volume indicators is to give you an indication of
the current market sentiment. Our volume indicators show you how
many active participants are in the market at any given time!
- Even for short-term
traders, it is imperative to know about the prevailing mid-term
trend you do not want to trade against it.
Recommendation:
- We strongly suggest complementing the
information you garner from our daily Market Outlook with
the intraday real-time volume charts found at
www.MarketVolume.com.
MarketVolume® is the only source of intraday real-time volume
charts for the major US indexes and exchanges, as well as for
advance/decline charts in real-time. MarketVolume® offers a free
30-day trial.
Click here to sign up;
- One key advantage of having access to
MarketVolume® charts is that you can reconstruct the volume
analysis we outline in the daily Market Outlook. Referring
to these charts while reading our commentaries will bring you to
a fuller understanding of the relationships between volume
spikes and index price movements / reversals;
- Consult the "Outlook" section of our daily
Market Outlook, as we frequently discuss our views of what
is likely to happen over the short term;
- Studying the principles of volume analysis
will enhance your ability to make profitable intraday trades.
- To achieve better result by using our market
commentaries for short-term trading we highly suggest to use
www.MarketVolume.com
charts. MarketVolume (MV) is the only source of intraday index
volume and advance/decline real-time charts for major US indexes
and exchanges.
Click here to sign up for Free Trial with MarketVolume.
- By having access to MV charts you can follow
volume analysis of the past day in our Market Outlook and
learn the relationship between volume spikes and price movement.
- Very often you can read in our outlook the
possible future short term trend, or what could happen during
the next few days in reaction to the recent volume.
- After you become handy in analyzing the
volume you will be able to make trading decision during the day.
- It could be quite profitable since you as a
short-trader could see right during the fist hour of trading day
if our last short-term prediction is correct, and if it's right
you can follow it (since the market most likely will continue to
follow our forecasting) and if it's not you can just wait.
- One more time fro short-term trading we
highly recommend to use real-time intraday volume charts from
www.MarketVolume.com.
Always remember, price changes are the direct
results of changes in demand — in other words, of volume! That
is why any appreciable volume spike is generally followed by a
change in the market's direction. How long and dramatic will such a
change in direction be? It is a function of a VMA spike's breadth
(how wide it is) and amplitude (how high it goes). Nature Magazine
published an article in their May 15, 2003 issue entitled "A Theory
of Power-Law Distributions in Financial Market Fluctuations"
[Authors: X. Gabaix, P. Gopikrishnan, V. Plerou, and H.E. Stanley.
Nature 423, 267-270 (2003)], which is based on the premise that
large movements in stock market activity arise from the trades of
large participants. The article went on to discuss that any change
in price is proportional to the square root of the number of shares
traded. It only took analysts six years to catch up to our
understanding of volume dynamics but better late than never, we
suppose!
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