Successful Stock Signals for Traders and Portfolio Managers: Integrating Technical Analysis with Fundamentals to Improve Performance, + Website

CHAPTER 16

Day Trading Using Candlesticks, Real-Time Volume and Price, RSI, MFI, MACD, and 20- to 50-Minute Moving Averages, with Salesforce Exhibits

WHAT IS THE WORLD OF TRADING?

Traders follow only one rule to make money: identify and trade ahead of a coming wave of supply or demand, just like riding a surfboard. Legal front running involves using technical signals to do this; illegal front running uses inside information to do it. In this chapter, we focus on the world of day trading. Candlestick charts are the working tool of a day trader. They were invented by a Japanese rice trader and popularized by Steve Nison.

Candlesticks and volume tell you about the shifts in supply and ­demand, trade by trade, minute by minute on the real-time charting ­supplied by most brokers or charting services. Traders will be ­looking for the doji reversal (it looks like a cross or a star) or the hammer and hanging man reversal signals on the candlestick chart. Day traders are most interested in reversals. It is the contrarian world of selling into strength and buying on weakness, using overbought and oversold ­oscillators. The stochastic, RSI, and MFI, based on 3- or 5-minute intervals, not 1-day intervals, help to identify the short-term support and resistance or tops and bottoms throughout the day. Breaking support or ­resistance levels throughout the day are key signals of demand and supply in ­action.

Accumulation/distribution, CMF, MACD, and OBV help them identify demand and supply with ...