How to Trade Stocks Profitably for Beginners?
Precise Sideways Price Action Means Buyers Are Dominant
Most Individual Investors and Retail Traders do not realize that they have a huge advantage over the professional side of the market. This is due to the constraints, restrictions, rules, and regulations the professional side must comply with on an ongoing basis. It is also due to the fact that 80% of the Professional Traders still do not use Technical Analysis.
In the candlestick chart example below, it is very obvious immediately how precise and consistent the sideways candlestick pattern is over time. What is also noticeable are the gaps that follow the sideways candlestick pattern.
Sideways price action that is precise like this means that the buyers are dominant. They have a huge amount of capital reserves and buy with a controlled and bracketed order that contains price within a narrow range and eliminates momentum action and volatility. There is also an incremental candlestick pattern in the sideways action. Each sideways candlestick pattern prior to the gap or run up is nearly equal in time duration.
These are the candlestick patterns that giant Buy Side Institutions create when they use Dark Pool Alternative Trading Systems (ATSs), consequently building platforms as they slowly accumulate millions of shares of stock. The more Giant Funds that buy the stock, the more consistent the platform candlestick patterns will be. The giant Buy Side Institutions are buying in incrementally over time and controlling price during their accumulation phase.
Once the giant Buy Side Institutions have completed their buying for that price level, it is obvious that High Frequency Traders’ HFT automated orders trigger, driving price up. High Frequency Traders HFT can also make mistakes, as shown in the middle chart window with the TT Volume Bars’ extreme red spike, which indicates an attempt to sell down the stock during accumulation. Smaller Funds always chase High Frequency Traders’ HFT action. Often, Retail Traders also chase High Frequency Traders’ HFT action too, not understanding the Stock Market Participant Group Cycle and how it affects the trends and trendline patterns that form over time.
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The stock was under heavy accumulation at the time the High Frequency Traders’ HFT triggered order attempted to sell down. Since the Giant Funds have massive capital bases and a controlled order to buy incrementally, their orders overwhelmed the High Frequency Traders’ HFT Sell Short orders rapidly and the stock continued to move up for many months afterwards.
Stock charts are the graphical representation of what the Stock Market Participant Groups who use Fundamentals understand about a stock and its company at that time.
There are nine primary Stock Market Participant Groups, and each group buys the stock at a different time during the up, down, or sideways price action. Over a time period of a year or longer, different Stock Market Participant Groups will be highly active or not buy the stock at all. When one or two groups are heavily buying or selling a stock, it is called “controlling the stock price”. Each group controls price in a specific way, creating trendline candlestick patterns that are easy to identify. When an Individual Investor or Retail Trader identifies who is in control, they will know how to trade the stock, which stock Trading Style and Strategy will work best, when to enter the stock, how long to hold the stock, and when to exit the stock.
Learning to identify who is controlling price at any given time reveals a huge amount of information that is not available in retail news, guru recommendations, or friends’ or co-workers’ opinions about stock trading.
To be consistently successful, Individual Investors and Retail Traders must learn and understand the Stock Market Participant Group Cycle and how it affects the stock trend over time. When this methodology is used, success at investing and trading will improve rapidly and consistently.
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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 & Option Courses
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