Moving Average, MACD, Stochastics, RSI are all lagging indicators
That is because indicators all use price as inputs
50 DMA, Market Strong Downtrend
Whenever Price Moving far Away from moving Average
Strong up move will follow soon
Same in Uptrend when price moving far away from 50 DMA
Price creates a reversal
Whenever price far from 50 DMA, look for shorting opportunities, the target should be the moving average
SImilar when price far away from 50MA, look for buying opportunities, target should be MA
Price in trend does not move in straight line
Price moves in zig zag pattern
Price move against the trend is called pullbacks
Shallow pullback if it does not go beyond 0.382. Shallow pullback leads to larger move
Market make a strong down move
Plot Fibonnachi retracement
The pullback is short and shallow, which does not go beyond 0.382 level
Hence strong down move
Next sharp fall after the shallow pullback
Strong down move
Plot the retracement
Retracement pushes up to 0.618 level, hence a deep pullback
Market moves downward in this case as well. But down move was normal and not as large as the previous one which preceeded merely 0.382 retracement
Big body candles show stronger conviction
This shows areas where there are string demand from buyers
If the price comes down to that area, buyers will come into action and buy again
When price come back into that area
Buyers push the price up again
Body size of candles in the box are small in comparison to the previous candles, which shows indescision in the market
Bias stronger and gained strength
Hence we can expect the trend to continue
Recent up move gradual and shallow compared to previous up move
So momentum has reduced, so we can expect the market to reverse
Market see a strong downmove
I’ve been trading for 20+ years. I lost a lot of money over the first half of my career… and then gradually learned what I needed to become successful. Here are my opinions, for what they are worth: Stop trading your capital immediately and start paper trading. Do it impeccably, as if you were trading your capital. No, paper trading will never feel the same as live trading, but before you get into dealing with the emotions involved, you need to get clarity about a few things which are these… If you’re losing then either your Technical analysis is wrong, or your psychology is… or both. Get clear about that and then fix them. The TA part is easier to fix. Find what works for you consistently and then repeat it for as long as it takes for you to get so comfortable with it you can do it brain-dead. I don’t care if you have to paper trade for 5 years, do it until you have the utmost confidence in it and you know everything about everything you need to do so instinctively and fluidly that nothing will rattle you. This will help a lot with the psychology part. When you don’t trust your tools and your instincts then you’re going to have doubts, and doubt is what makes a trader nervy. Also pertaining to psychology… and this is going to seem nuts, but you MUST accept that sometimes you are just going to be wrong and you will lose money, and you have to be ok with that. If you’re not, you’ll be tight and fearing losses… which will CREATE losses. Another thing to help with psychology…a baseball analogy you may have heard… Don’t swing for home runs, swing for singles. In other words, place small trades with small risk to lessen the nerves and allow you more wiggle room in your trades. Do you realize that you only need to make $130 a day in order to make 31k a year trading? With good skills and a 50k account that is very easily doable once you get your craft down. It is worth taking the time and making the effort to do it right. And that reminds me, if you’re trying to make a living as a trader with a 5k, 10k, 25k, or less than a 50k account, I recommend you go back to your job and save up more money while honing your skills in the meantime. I’m trading a 500k account and I am SUPER conservative. I could be trading 10 ES contracts a pop, but I rarely go over 6 and I average 3. I fairly consistently make $300 – $1000 a day. My typical scalp trade will yield 50 – 100 dollars per contract. I’m not glued to my screen all day. I get up and move around. I take the trades that look the best to me. I’m not in a hurry to get into a trade. I pick those that look and feel the best to me, and I wait as long as I need to for that to occur. The market works for me, I don’t work for it. Here’s a few more things that come to mind that I wish someone told me early on: Capital preservation should be your #1 goal. If you lose your money you’re done. Any trader you ever talk to or read, if they don’t prioritize capital preservation, run from them and don’t look back. It’s everything. Next, Trade your personality. If you’re a naturally high strung, nervous type… I highly recommend you never, ever go near any futures market and you should probably stay away from scalping, although not necessarily. You can scalp stocks and not go gray, but you have to find your place in all of it. As for your TA, if your charts look like some mad scientists with 10 moving averages and 8 different studies, then you’ll never be successful. I use one study and 4 MA’s on any time frame chart, from the one minute to the monthly. I use trend lines, Fibonacci Retracement, and I look for formations like flags, channels, wedges, head & shoulders etc. If you told me I had to trade a naked candlestick chart and could only use two tools, I would use trend lines and Fib retracements and I can make money using any futures contract or stock that gets a couple million trading volume a day. The simpler your charts, the better. It’s all just price, time and volume anyway. Finally, I personally do not get into any trade unless and until I know 3 things, from least important to most… 1. Where am I getting in. 2. Where is my target. 3. Where am I stopping out if I’m wrong. There are no exceptions to this. Oh, some intangibles… I personally like to trade one thing and stick with it. Pick one stock that moves well or, when you are more experienced one futures contract. Every equity has a sort of “personality” in the way that it trades. If you spend enough time on one symbol you’ll come to understand this. Intuition can be a huge part of trading, and when you trade one thing long enough you can get to the place when you can feel what it is going to do just before it does it and that gives you a tremendous edge when and if you can get to the place where you can trust and act on that intuition in a moment’s notice.