Your
looking for trade candidates. You've collected your
data and run your To Do List. You take a look at
your Focus List and there it is - a brand new "buy"
signal! Great, now you just enter a market order,
right? Wrong! OmniTrader has presented you with
a trade candidate. But before entering a trade,
we need to confirm the signal. Today's lesson is
part one of a two part series on confirmation techniques
using OmniTrader.
Confirming a Trade
with Chart Patterns
Regardless of what you are trading, there are only
two types of trades: Reversals and Continuations.
The following table shows the type of trade and
which chart patterns can be used to confirm that
trade:
|
Reversal
Trade
|
Continuation
Trade
|
| Support
and Resistance Levels |
Consolidations |
| Trendline
Breaks |
Trendline
Reversals |
| Exhaustion
and Breakaway Gaps |
Breakaway
and Measured Gaps |
| Saucer
Patterns (at bottom of pattern) |
Saucer
Patterns (at resistance level of pattern) |
| Volume
Climaxes |
Volume
Trends |
Let's
look at an example:
CTXS
shows a support level, trendline break, breakaway
gap and volume climax.
The
chart for Citrix shows four of the five patterns
that are good reversal indications. The more patterns
that confirm a move, the better. When we look
for good trade opportunities, we want to find
charts with the least technical risk.
Confirming
a Trade with Trading Systems
Another tool you can use to visually confirm a
trade is the systems in OmniTrader. There are
many users that will plot a favorite system with
every chart and once they receive a signal from
OT, they will look at the system for confirmation.
The example below shows a MAC-M system plotted
that confirms a good trade signal from the Default
Profile.
MAC-M
confirms a good buy signal from OmniTrader
|
To
plot a system on every chart in OT, simply
click on View and select Chart Options.
If you click on the Plots tab, you will
see the list of OT systems and by clicking
on one it will be selected to plot on all
of your charts.
Some
of the other systems that users find useful
in confirming trades include MV2-C, STO-C,
DMI-C, SAR-C and RWI-B, among others. So
now you might be asking "Which system
is right for me?". Try clicking on
the different systems in the Plots list
and look at when they fire signals. Certain
systems signals will appeal to you, depending
on the type of trades you are looking for
and the entry point you are looking for.
If you are simply looking for a confirmation
filter, then we recommend using MAC-M.
Note: If you are using MAC-M to confirm,
look at the chart closely for a consolidation
as this system is prone to false signals
when securities are in a tight range.
I hope that this lesson on visual confirmation
has been helpful. Next, we will continue
our discussion on confirmation by looking
at some of the automated tools you can use
in OmniTrader.
Best
of luck with your trades.
Jeff
Drake
Director of Education
Nirvana Systems
jdrake@nirvsys.com
|
|
|
