TechniTrader Beginners "Improving the Use of Bollinger Bands"

Adding Quantity, Volume, or Flow of Funds Indicators to the Analysis


One of the most exasperating things that happen to Retail and Technical Traders is to find a chart with a perfect setup but the stock has already gapped or run up with a huge one day gain, as High Frequency Trading algorithms triggered the running or gapping of the stock up in the first few minutes of the trading day.

Many traders want to learn how to capture these gains, and be in the stock before a huge gap or big run day and improving the use of Bollinger Bands is the best method.

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Bollinger Bands are the best Channel Indicators for Technical Trading, and for finding breakout compression patterns prior to gaps or runs. The ability of the bands to expand and contract, makes them the ideal Channel Indicator to use. However as with ALL Channel, Price, and Time Indicators they require additional indicators as directional signals.

Bollinger Bands tell you that a stock is poised for a strong Momentum Run or gap, but do not tell you whether the Breakout will be to the Upside or Downside. During Trading Range Market Conditions, it is impossible to “guess” the Breakout direction solely using Price and Time Indicators.

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Employing Quantity, Volume, or Flow of Funds Indicators provides the complete set of indicator analysis to determine the direction of the Breakout when using Bollinger Bands. When trading Options this eliminates the need for Options strategies that buy both a Call and a Put, because the trader has no idea what direction the Breakout will go. When trading Stocks it eliminates the risk of whipsaw action, or just assuming that because the Indexes are down that the Breakout will be down also.

This is especially helpful during Bottoming Market Conditions when stocks frequently retest prior bottom lows. Below is a chart example with Volume and Quantity Indicator windows.

chart example with volume and quantity indicator windows - technitrader
1. Quantity Indicators reveal the slow Quiet Rotation™ and Quiet Distribution, and Quiet Accumulation patterns by the giant Buy Side Institutions. The TechniTrader Quiet Accumulation TTQA Indicator was designed for MetaStock users for this purpose. Quantity indicators are used by Professional Traders regularly but are rarely used by Retail Traders. There are both line and histogram Quantity Indicators available.

2. Volume Oscillators are also seldom used by Retail Traders. These offer a significant advantage over Price and Time Oscillators, which tend to give false signal during Momentum Runs, Velocity Runs and other fast moving price action that exceeds the parameters of the price oscillator scaling.

3. The Flow of Funds Indicators are another group of indicators that help determine direction of a Breakout. Oftentimes Smaller Funds and Independent Investors are selling, at the same time giant Buy Side Institutions are quietly buying the same stock hidden from view on Dark Pool venues. These types of indicators show whether money is flowing into or out of the stock.

By incorporating additional indicators into the stock analysis, Retail and Technical Traders can significantly improve their trading profits by identifying the direction of the Breakout prior to price suddenly moving with momentum, a gap, or velocity action caused by HFT triggers.

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Summary

Quantity, Volume, or Flow of Funds Indicators are easy to interpret, provide the missing data for a complete stock pick analysis during sideways patterns, and are best for improving the use of Bollinger Bands.

For Options Traders, this is a far more useful analysis than traditional Options Indicators, and it can lower contract costs by providing the missing data needed to choose the proper contract and Option strategy.

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Trade Wisely,

Martha Stokes CMT


TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2016-2017 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only. 

Rotation Patterns Explained with Stock Indicators

Buy Side Institutions Using Dark Pools

Most Technical and Retail Traders have heard about Buy Side Institutional Accumulation and Distribution, but few understand another institutional action which is ROTATION.

Accumulation is the acquiring of hundreds of thousands, to millions of shares of stock over an extended period of time. Quiet Accumulation is the most common nowadays which is when institutions use Dark Pools aka Alternative Trading Venues that do not show their activity on the exchanges. Buy Side Institutions are able to hide their 100,000 – 500,000 share lot activity from High Frequency Traders, Independent Investors, Retail Traders, and Small Mutual Funds and Small Pension Funds Managers by using the Dark Pool venues.

This enables them to buy large to giant quantities of stock over time without disturbing price. The primary difference between exchange activity and Dark Pool activity is the ability of the Buy Side Institutions to not alter the trend that is underway at that time.

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Buy Side Institution Quiet Accumulation INCREASES the amount of money in the stock market fueling Bull Markets and Uptrends, even though the Institutions buy in such a way so that price does not move much when they are buying.

Distribution is the selling of a large quantity of stock overtime, OR because of redemption demands. High redemption demands tend to occur near the end of an Intermediate Term Correction or the end of a Bear Market. Therefore Dark Pool Distribution is often faster than Dark Pool Quiet Accumulation. Dark Pool Distribution is when Buy Side Institutions sell huge quantities of stock without moving price much. Buy Side Institution Quiet Distribution REMOVES money from the stock market, which fuels more downside selling.

Rotation patterns occur during the mid to final years of a Great Bull Market, which is a Bull Market that lasts for more than 4 years. Quiet Rotation™ is the systematic, and carefully calculated selling of shares of one stock and the buying of another stock. Rotation patterns tend to slowly bend trends either into a Bowl Bottoming Formation OR into a Rounding Top Formation. Platforms are also a common pattern for Rotation, into or out of a stock.

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Quiet Rotation does not remove money from the Stock Market. Instead it merely MOVES MONEY AROUND from one industry to another and from one stock to another.

The chart below with a monthly view shows the commencement of a Rounding Top Formation that developed due to steady Quiet Rotation over several months.
monthly time line showing a rounding top formation - technitrader

This stock is slowly losing Institutional percentage holdings as these giant institutions quietly rotate out. Their goal is to not disturb the Uptrend buying frenzy of Independent Investors, new Investors, and Retail Traders who rely upon recommendations and gurus for stock picks. As the stock moves up with smaller lot buyers who have less capital than the giant institutions, the trend slowly bends under the weight of the large to giant lot Quiet Rotation of the giant Buy Side Institutions.

This is a critical pattern to recognize for Technical and Retail Traders especially in highly popular recommended stocks, as weakening trendlines due to Quiet Rotation are harder to see in candlestick patterns early on.

What is essential to have are indicators that reveal the Dark Pool Rotation patterns before price begins to bend and round, which can create whipsaws for Swing Traders and Day Traders resulting in losses that could have been avoided.

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Summary

The TechniTrader Volume Accumulation TTVA and TechniTrader Flow of Funds TTFF indicators clearly show the steady Quiet Rotation pattern over time, even as price moves up. This allows Technical and Retail Traders to avoid entering a stock that is actually weakening into a Rounding Top Formation, rather than what at first may appear to be merely a consolidation or sideways pattern.

By recognizing Quiet Rotation Patterns early on enables Technical and Retail Traders to be prepared for Corrections and Selling Short, by Swing Trading the downside action if they have the education.

Go to the TechniTrader Learning Center and watch a wide variety of webinars, to experience for yourself the excellence of TechniTrader education. TechniTrader is "The Gold Standard in Stock Market Education."

                                       Go to the TechniTrader
                                  "Learning Center Webinars"

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Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock



Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner



©2016-2017 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.



Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.