The website Verticle Solutions provides a real time gauge with a proprietary alogorythm that determines whether the current day's structure indicates we are trending or in a range bound environment.
I look at it a couple of times a day as another way of monitoring market activity. It's an interesting tool and I like anything that has colors and arrows. I do like my gauges.
Today started with a gap of over 1% and good earnings news from Intel which are often catalysts for the formation of a trend day. Trend days can make your week or even your month if played correctly so it is important to be able to identify one early in the day so that you can take advantage of the easy pickings during the rest of the day.
If you just focused on price alone, you really have no indication that today is not a trend day (as of 12:00 pm EST). We had a large opening gap, and price hasn't crossed the 20 period moving average (green line). It seems that the bulls are in complete control, and the news is hailing DOW 10,000 before it even happens.
But when you look at market internals you'll see a different picture. The NYSE TICK is a great tool for understanding what is going on "behind the curtain".
I've posted a capture of the NYSE TICK which shows that caution should be taken in assuming this is a trend day. Usually on a trend day you'll see extreme readings on the TICK (above or below 1,000). The green line is +1,000 and the red line is -1,000. As you can see, the TICK has not reached extremes on either side of the spectrum. To me, it looks weighted on the sellers side, especially during the first couple hours of trading.
Currently, it looks like TICK is hovering around the "zero" line which indicates this day is more like a "range day" than a trend day. Using tools like the TICK can help you make better decisions about price structure and allow you to determine how aggressive you want to trade. On a trend day you want to go nuts and risk a lot to make a lot. On a range day, caution is the theme of the day and you should trade much more conservatively.
As always, it will be interesting to see how the day plays out.
Things are finally starting to click for me again. I've made my target for May this week. It helped that there were 3 trend days this week! Usually you can expect 3 or less trend days in a month, so it is best to take advantage of them when they show up.
I took advantage of the trend day Monday. We got another one on Wednesday, but I was so biased toward the bearish side that I refused to acknowledge the day until it was over. Today (so far) we've got another bullish trend day going.
I was bearish after the gap began to fill extremely aggressively after the morning "pop" I even went short on what I thought was a bearish flag pattern developing. A few minutes later and I was stopped out.
I've had a lot of trouble with my biases messing up my trading. I've got to learn that the market could care less about what I think it should do. it does whatever it wants to regardless of what everybody thinks it will do. I've stopped listening to news radio while trading because I've noticed that news reports influence my ability to stay focused on what the market is doing as opposed to what I think it will do.
I used to start preparing for the market an hour before the open hoping to glean some sort of nugget of information that I could use to make better decisions. I've noticed that my trading has improved dramatically since I've started turning on my computer and trading software just 10 minutes before the market opens.
I've also been trying to recognize trend days earlier, and that stop out was a wake up call that today was favoring one. I took a trade after the 2nd wave of an Elliot Wave pattern completed (right at the number 2). I had no clue that an Elliot Wave was forming, I was just anticipating a trend day trade.
I sold when price made a new high, and watched as the price continued on about 2 times higher after I sold. That should have clued me in that wave 3 was in progress. I missed two trades (from a to b in wave 4) and wave 5. I tried to get in as price touched the 20 period moving average, but I was too slow calculating everything and price rocketed to new highs and left me behind. Dang it.
I made another "trend day" trade as price consolidated around the 20. It was a hard trade to take because the stock chat rooms that I read were all saying that the rally was done and that we were headed lower and hard. I'm learning that the only thing that matters is what the market is telling us in real time.
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