Wilder’s RSI versus Stochastic Indicator

Exposing Bottoming Strength Prior To Gaps

Stochastic is the most popular of all of the Price Oscillators available for stock chart analysis. in review of Indicators, they should be set up for your own personal trading style and trading parameters. Being as specialized and proprietary as you can possibly be with your own unique set of trading indicators is a huge plus, and gives you a decided edge against the professionals in the market.
Using an indicator that is overly popular can be detrimental to your success as a Retail Trader. It can be hard to switch to a less known indicator because most traders want to be part of the crowd. But being part of the retail crowd means you are constantly at higher risk of whipsaw trades, as “Cluster Orders” are constantly being tracked by the High Frequency Trading Firms.
In comparing Wilder’s RSI versus the Stochastic Indicator, the advantage is that Wilder’s RSI is not widely used these days, and has the added feature of being highly adaptable and modified. Below in the middle chart window is an example of how I set up the Wilder’s RSI indicator for my TechniTrader Students, and below is Stochastic in the bottom chart window. This provides a visual comparison for you between these two indicators, in relationship to price action in the chart.
chart visual comparing the two indictors - technitrader
As with volume oscillators, a center line oscillation feature for Wilder’s RSI adds depth to the analysis. Instead of looking at merely Overbought/Oversold patterns of highs and lows, when the RSI starts to waver around its center line it exposes the bottoming pattern of the stock before it gaps up.
Stochastic as it is traditionally used strictly for Overbought/Oversold, is not exposing the bottoming action underway. The oscillation actually causes whipsaw risks during this bottoming phase.
Additional comparison of Wilder’s RSI versus the Stochastic Indicator shows that using RSI to expose the strength of the bottom via a center line that floats with price direction, tells you far more about the strength of the sideways pattern and the decided upside direction even though price is still sideways.
Also RSI is a very different formula compared to Stochastic. Wilder wrote it to expose whether the current price was stronger or weaker than “X period” or number of days ago.  Therefore what you are looking at is a Relative Strength relationship between the current price and “x number of periods” or number of days ago.
Therefore RSI can and does expose strengthening price action to the upside or downside in a sideways pattern. This is a huge benefit for Retail Traders because the markets move sideways about 60% of the time.
Summary
Although Stochastic is great for exposing the Overbought/Oversold aspects of a sideways pattern, what is even more important is to be able to anticipate what direction the stock will move and how fast it will move out of a sideways pattern.
RSI is superior in revealing strengthening price action, which in turn exposes momentum prior to gaps and fast runs. Use RSI as the market begins to bottom. It is a very underrated indicator that Retail Traders can use to see momentum building, prior to huge price gains.

I invite you to visit my Learning Center which is located on my main website TechniTrader.com. It is full of Webinars on a wide variety of topics including leading indicators, below is a link for you:
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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 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. 

Doji Example Review for Decoding Candlestick Charts

How to Develop Spatial Pattern Recognition Skills for Fast & Easy Reading of Stock Charts
When Candlestick Charts were first introduced to the western markets, everyone using Stock Charts and Technical Analysis relied on indicators more than Bar Charts, which were the most popular charts back then. Bar Charts are much harder to read, give less visual data, and take longer to interpret. Candlestick Charts were instantly popular because they made reading price fast and simple.
In the beginning Candlesticks were assumed to be the confirming indicator, which made pure price subordinate to indicators such as MACD and Stochastic both very popular indicators. However decoding Candlestick Charts and using Candlesticks as the entry signal rather than just confirming a continuation of the trend or a reversal of the trend, enables traders to use pure price as their entry and exit signal.
Spatial Pattern Recognition Skills™ SPRS are something most traders do not have, and need to develop. It takes a while to learn how to read Candlesticks as quickly and as easily as you are reading this text, but when you can do so it opens up a world of information about why price is moving as it is and how it will move next.
During Trading Range Market Conditions as we have now, keen SPRS are imperative. Otherwise the markets seem merely volatile, unpredictable, and confusing. By learning SPRS you can speed up the entire analysis process, and find strong picks to trade.
Everyone who uses Candlesticks knows what a Doji Candlestick is, however where it forms can reveal a great deal. As an example using the Doji for decoding Candlestick Charts, the Doji can be a resting day candle and the stock will continue moving down, OR the Doji can be an exhaustion pattern in which the stock will reverse, OR the Doji can expose Dark Pools controlling price.

The reason Dark Pool Quiet Accumulation is easy to recognize in a candlestick formation, once it is understood how giant Institutions using Dark Pools buy and sell, the patterns become obvious and are instantly easily recognized. In the chart example below the tight formation of Doji first being white, then black, and then white again is a Dark Pool Quiet Accumulation Candlestick Chart pattern. 
chart example as doji in a dark pool quiet accumulation - technitrader

Since this is also a compression consolidation of Doji, it is also indicating a likely Breakout pattern. The stock may either run with High Frequency Trading HFT triggers or gap. Entering early in this tight consolidation of Doji, ensures that the trade is executed before a potential run or gap. The more compression there is then the more velocity behind the Breakout, with the pattern definitely favoring an Upside Breakout. The way the Doji have formed in the Candlestick Chart tell the Technical Trader with strong SPRS, that this is an Upside Breakout about to occur soon.
Summary
The chart example also gives other information regarding decoding Candlestick Charts. The stock has bottomed decisively and recently. It has no strong resistance above price. The tight consolidation of Doji was preceded by speculative trading triggered first by Professional Traders, then HFTs, and then Smaller Funds. The stock went sideways as Professionals took profits while Smaller Funds bought. Now it is in a very tight formation. The control of price requires a very specific type of order that only Dark Pools use regularly.
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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 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. 

TechniTrader Beginner "Improving the Use of Bollinger Bands" by Martha Stokes CMT

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 HFT 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.

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 such as we currently have now, it is impossible to “guess” the Breakout direction solely using Price and Time Indicators.

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.

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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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 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. 

Swing Trading Momentum and Velocity Runs

Indicators Signal Entries and Exits
Swing Traders need specific tools to help them choose the best stock picks for the fast-paced Swing Trading Momentum and Velocity Runs that occur, as stocks fall so quickly that Bargain Hunters move in. Bargain Hunting is the realm of the largest lot buyers and occurs mostly on the short term trend.
Sudden reversals with the right indicators can help confirm that the signal is a true momentum signal, and that the stock is poised for sudden momentum or velocity action. This is because Dark Pools quickly remove liquidity creating an imbalance between supply and demand that Professional Traders search for, in order to buy into the Momentum Runs that follow.
By employing one of the professional style indicators such as TechniTrader Quiet Accumulation TTQA, an early alert is shown on the chart as indicated by the green arrow in the bottom chart window.

This stock has fallen into a high of a prior Dark Pool Buy Zone™ price range. The zone or range is below the low of the white candle, but both TechniTrader Volume TT Volume and TTQA clearly show a sudden shift is about to occur. High Frequency Traders HFTs are still trying to sell the stock down, as Retail Traders sell short without recognizing the Shift of Sentiment™ has begun.
The next day HFTs drive the stock down in a few minutes after market open, so quickly that Retail Traders are unable to enter without extreme risk. The risk is that orders in the Dark Pool Buy Zone now trigger, and Time Weighted Average Price TWAP Dark Pool orders quickly move the stock up in the same day. 
The Shift of Sentiment on TTQA which is a professional style indicator, clearly reveals their activity before the stock runs with momentum. Volume is also a key indicator but in a different analysis.
This allows Retail Traders to trade with Professional Traders, who provide reliable and consistent run activity. Instead of chasing a run, Retail Traders are able to trade with the Profesionals. The consolidation is a period of resting. Professionals are taking profits while the Smaller Funds Volume Weighted Average Price VWAP orders are firing off creating the high bars on TTQA. Resistance is the red line drawn above price.
Summary
TTQA is a special indicator that has several different patterns which are easy to read and interpret. It can reveal aspects of who is in control of price, where Dark Pools are buying or selling, and when HFTs are likely to create big sudden moves.
It also shows Professional Trader and Smaller Funds activity. This new type of indicator can be an excellent addition to any Traders indicator tool kit but is particularly useful to Swing, Momentum, Velocity, and Day Traders.
Being able to plan an entry rather than chase a run, is a key ingredient to high income from Swing or Day Trading.
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Followers may request a specific topic for a blog article by emailing info@technitrader.com.

Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using MetaStock charts, 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 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. 

Center Line Price Oscillators


The Benefits of a New Type of Price Oscillator

Most Price Oscillators are designed strictly for overbought or oversold conditions. These indicators work well when price is oscillating between a high and low range, but tend to show overbought signals when a stock is about to go momentum. The tendency for these the older style overbought/oversold price oscillators is to show an overbought crossover signal as price begins momentum action, which often causes Technical Traders to exit a trade just before huge profits could have been captured.

By using a Center Line Price Oscillator during momentum phases of price action Technical Traders can hold, instead of selling just as the stock is about to run with strong velocity or momentum action.

The TechniTrader Center Line Price Oscillator called TTRSI uses a floating center line that provides flexible indicator action as price moves up. It is ideal for momentum and velocity price action as it will reveal the underlying momentum, whereas a standard price high/low range oscillator such as Stochastic shows an extreme overbought pattern that most traders use as an exit signal.

The chart example below shows the TTRSI indicator with center line oscillation in the middle chart window, and Stochastic in the bottom chart window for easy comparison.

chart example with center line oscillation - technitrader

This indicator is designed for analysis of price during a momentum or velocity run, and it is superior to Stochastic for momentum analysis.

Traders using Stochastic would have exited prior to the big gain day missing out on the largest one day gain for this run, that continued the next day. RSI then indicates the run has fatigued, and the risk of profit taking at this point means either exit or tighten the intraday stop loss.

Summary

Center Line Price Oscillators are superior to standard overbought/oversold price oscillators during momentum and velocity Market Conditions. Momentum or velocity price action occurs after giant lot Buy Side Institutions have been accumulating a stock for some time by suing Dark Pools. When Professional Traders and High Frequency Trading firms HFTs discover this accumulation then they drive price upward out of Bottoms, minor Corrections, Platforms, Consolidations, and Compression Patterns.

Using a Center Line Oscillator for price enables Traders to hold longer, and enjoy the gains of a momentum or velocity run.

                                                         Go to the TechniTrader.com
                                                        "Learning Center Webinars"

learning center webinars - technitrader
Followers may request a specific topic for a blog article 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 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.