Avoid The Algos With Longer-Term Trades
Technical analysis works better on long-term charts than short-term charts these days because it’s harder for program algorithms to manipulate price direction over time. The natural forces of supply and demand take control in these broader time frames, letting the chart do the job it was designed to do, namely, identify support/resistance levels and predict trends. As a result, moving out on the time spectrum also aligns perfectly with a survivalist trading mentality.
To get started as a longer-term trader, here are ten useful techniques to play the long-term charts:
- Look back at least ten to fifteen years to find every high and low swing that might affect the outcome of your trade.
- Take small positions and stop using margin. This lowers risk by letting price jump around without shaking you out of good trades.
- Limit your portfolio to slower movers that are less likely to exhibit sudden or violent price movement.
- Trade exchange-traded funds whenever possible because you’ll avoid company news that sends individual issues through the roof, or over a cliff.
- Keep stops loose and out of the way of the current swing, making sure they’ll only get hit if there’s a change in the underlying trend.
- Apply weekly Bollinger Bands, set to 20-week and 2 standard deviations. This tool will expose the most favorable periods to enter and exit positions.
- Trade at the edges of support and resistance, finding the price where weak hands will get shaken out. That’s where you want to place your order.
- Build the position over time with dollar cost averaging, but line up your entries with large-scale support and resistance.
- Use weekly 5-3-3 Stochastics to identify long-cycle buy-sell swings. Try to buy on the upswing and sell on the downswing.
- Do nothing until the market planets come into perfect alignment. It’s easy for remote traders to get bored and lose their discipline.
Choose less volatile stocks and use physical stop losses, unless you’ve established a real time alert system. Beyond that, remote trading with long-term charts can be done with great success. However, there’s a real danger if your reach exceeds your grasp, i.e. you get lucky a few times, forget your limitations and start playing too aggressively. With so many points between major price levels, and so much time to kill, its easy to step into a high-risk situation without realizing it, and then fail to get out of the position when things go haywire.
2012-09-30 20:41:43
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