DrBourse TA Help for Beginners

[DrBourse]

An Overview of Indicator Parameters.

 

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More Indicator Signals - Understand what they are telling you.

 

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A brief pverview of Chart Types.

 

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A brief explanation of Linear Regression.

 

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Phantom Divergences.

 

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Basic explanation of Market Depth.

 

[DrBourse]

Algorithmic Trading, also called automated trading, black-box trading, or algo trading, is the use of electronic platforms for entering trading orders with an algorithm which executes pre-programmed trading instructions whose variables may include timing, price, or quantity of the order, or in many cases initiating the order by a "robot", without human intervention. Algorithmic trading is widely used by investment banks, pension funds, mutual funds, and other buy-side (investor-driven) institutional traders, to divide large trades into several smaller trades to manage market impact and risk......
Algorithmic Trading Definition 1 – Trading, where a computer program performs the decision-making around what quantity, price, order type, wait-time and size to use when calculating an order... the computer then automatically places the trade when set parameters are met... An algorithmic order is chopped up into many smaller orders each of which adjust their pricing and aggressiveness based upon factors such as: – Real-time market data – Current status of the order – Algorithm’s parameters.......
Algorithmic Trading Definition 2 - where a large number of small trades appear, they are usually generated by a fund/broker, they can buy shares as a bulk buy but only up to a certain limit, as the ASX does not want them to Spook the Sheep, so as an alternative process they tend to take small bites, and hope the observant ppl like you just do not notice the numerous small trades.......
Algorithmic Trading in Depth Explanation - Algorithmic trading Shares are traded on ASX on a price and time priority basis. If you are using an online broker, your order is routed directly to the market via your broker’s filters. This is called Direct Market Access (DMA) and it allows you a high level of control over your trading. DMA enables brokers to enter your order into the market, via their IT systems and pre-trade filters. Some professional traders also use DMA. However, instead of manually entering their orders into a computer, they rely on a set of trading rules (trading algorithms) which are entered into a computer.......
The computer then makes trading decisions for the professional trader based on these rules. Trading algorithms can be programmed to achieve different objectives – such as to minimise market impact costs and capture trading opportunities. An algorithm is simply a set of instructions to complete a given task. Algorithmic trading is a computerised, rule-based system responsible for executing orders to buy or sell a security.......
Algorithmic trading activity on ASX has meant; - 1/ trade execution speed increase,........ 2/ daily transaction volume increase,....... 3/ an average value reduction for each trade........
Many retail investors find algorithmic trading unusual because it can generate a lot of trades for very small numbers of shares. ASX closely monitors algorithmic trading patterns – as it does for all trading activity - and while the level of algorithmic trading has increased in recent years, it has not raised major issues for ASX........
When ASX does uncover evidence of manipulative trading behaviour, however generated, a referral is made to ASIC, the regulator. To better understand the effects of algorithmic trading, it is useful to understand what algorithms are seeking to achieve.......
Execution algorithms were developed to minimise the market impact of large orders and therefore reduce the costs of trading. The most common of these is VWAP – an algorithm designed to ensure that the execution of a large order is done at the volume weighted average price of a security over a day........
Situational Algorithms are more sophisticated algorithms, which seek to profit from changes in data, information and events. Whereas an execution algorithm is used to execute a pre-existing order in the most efficient manner, a situational algorithm seeks to take advantage of a particular situation – hence the name.......
It will create orders from a computer-generated algorithmic strategy as well as execute the orders as efficiently as possible. Example of an execution algorithm undertaking a Volume Weighted Average Price strategy The VWAP strategy is one of the most commonly used trading algorithms. The aim of the strategy is to achieve a steady price over the day, weighted by the volume (number of shares) traded. A VWAP order would typically be achieved by splitting the total order into multiples of smaller orders, with these smaller orders being executed during the day........
The table below shows a typical course of sales from a VWAP strategy. There are two large orders then a series of small orders being executed as part of the VWAP algorithm........
A Trade History as shown within The Course of Sales for 19775 Shares could look like the following:- (Security Code, Price, Trade size, Time)
XYZ 2.95 12,394 11:35
XYZ 2.96 7,356 11:35
XYZ 2.96 5 11:36
XYZ 2.96 5 11:36
XYZ 2.95 5 11:37
XYZ 2.97 5 11:41
XYZ 2.97 5 11:43
ASX does not have system minimum limits on trade size for execution - however brokers may set limits on the volume and or value of the trades their clients can execute through their systems. Many stockbrokers will typically set a minimum order size of $500, OR LOWER...So orders as small as 1 are often seen within the “Course of Sales”......

 

[DrBourse]

Red/Green Candles - It is usually always a 'warning' when a stock is "UP" for the day - but has a RED Candle for the day, alternatively, it’s usually always encouraging to see a stock that is "DOWN" for the day – but has a GREEN Candle for the day.

 

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Head and Shoulders - One of the most reliable reversal signals is a head and shoulders formation.... As the name implies, it is created as a result of three congestion areas.... The first forms a shoulder, the second the head and the third a second shoulder.... The head congestion is above the shoulders, which both form on the same support line and within the same basic range.... In the case of a head and shoulders top, the reversal of a bull market trend is signalled.... The projected target lower is the same distance below the neckline as from the neckline to the head.... A break of the neckline not only signals a move to the target area, but also confirms the trend change and the start of a new bear market trend.... Rallies are generally associated with increasing volume during a bull market phase, therefore when volume decreases on a market advance it can signal a potential reversal.... The head section of the head and shoulders is often accompanied by decreased volume, relative to past advances.... The right shoulder, too, often has very light volume associated with it, but the break of the neckline and the subsequent move lower will generally see volume increase.... A break of the neckline will often see price retest the old neckline, which then becomes resistance, prior to the major move lower.... As a result there is often a second opportunity to establish a position if you miss the initial neckline break.... In the example below, the second shoulder is still in the process of being formed, but one can already see the recognisable shape of the head and shoulders....

 

[DrBourse]

Up or DOWN GAPS PROVIDE ACCURATE SUPPORT/RESISTANCE AREAS- A Rule of Thumb suggests that for these Gap Areas to be effective:- the Gap must be Similar in SIZE (High to Low), or Larger than, an Average Large Candle for the Stock - Gap Areas are governed by the same rules as Support/Resistance Lines, in that they are often broken very quickly, but on average they are formidable barriers to any Stock.... There is a common misconception that once GAP AREAS are broken, they are no longer effective, this belief is incorrect, Gap Areas are similar to Support & Resistance Lines, Support & Resistance Lines continue for as long as is required, They often change from Support to Resistance or from Resistance to Support, Gap Areas are the same, they continue for as long as is required, They often change from Support to Resistance or from Resistance to Support... For Stocks that continually GAP, the effects of those GAPS are less Potent. For Stocks that rarely have GAPS, any GAP usually has a PROFOUND EFFECT. A Gap Up suggests a Positive Trend should follow - A Gap Down suggests a Negative Trend should follow. Other Smaller Gaps usually relate to a Candle Pattern or a Candle Formation (as suggested in pages 10, 22, 24, 25 and a few other scenarios that are not included in my Original Manual)... When the Price is BELOW a Gap, The Top of a Gap is referred to as the Major Resistance Line, The Bottom of a Gap is referred to as the Minor Resistance Line, So for an Uptrend to continue the Price needs to pass above the Minor Line then above the Major Line... When the Price is ABOVE a Gap, The Top of a Gap is referred to as the Minor Support Line, The Bottom of a Gap is referred to as the Major Support Line, So for a Downtrend to continue the Price needs to pass below the Minor Line then below the Major Line...

Refer to Snapshots 203 to 212 near the top of this Forum.

 

[DrBourse]

All TA has 'Names', like Gaps, Candles, Trend Line Formations, etc, etc, - the trick is to learn what effect each "event" has on a stock price, forget the names, it will make your life a lot simpler..

 

[DrBourse]

Everyone should experiment and find a Trading Approach that works for them - my manual is basically to get ppl to understand what I do, how it works, then hope they will try to discover something that works for them, I suggest that you read p36 (the black text),& all of p49 & p119 - It also depends on what Software Trading Platform you use - there is not just one program that has ALL the available Indicators, so you would need to become an expert with Indicators that you have available to you.
One thing that I do suggest to ppl is that "you should look at a chart, decide where you would have LIKED to enter and exit a trade, then use different indicators & indicator settings to help show you those entry/exit points, then paper trade with those settings on various stocks to see how consistently they work.