OBV - On Balance Volume

On Balance Volume (OBV)

On Balance Volume (OBV) combines price and volume to determine whether price movements are strong or are weak and lacking conviction. On Balance Volume is a simple calculation, which is given below:

1. On an up day, the volume is added to the previous day's OBV
2. On a down day, the volume is subtracted from the previous day's OBV.

Volume is usually interpreted as follows:

• Increasing or decreasing price accompanied by increasing volume, confirms the price trend.
• Increasing or decreasing price accompanied by decreasing volume, indicates that the price movement is weak and lacking conviction.

The On Balance Volume indicator is used mainly to confirm price trends or warn of potential price reversals because of divergences between the price and the OBV indicator. An example of an On Balance Volume divergence is given below on the price chart.

High #1 to High #2

Merck stock made higher highs, but the On Balance Volume indicator made lower lows. This bearish divergence warned that price could potentially fall.

Since the On Balance Volume indicator adds volume when price closes higher than the previous day's close, the OBV indicator could be interpreted as meaning that less volume flowed into High #2 than flowed into making High #1. Less interest by buyers at High #2 signaled that the price move higher was unlikely to continue.

High #2 to High #3

Again, the price of Merck stock increased, yet the OBV indicator warned that more volume was occuring on down days than up days. This bearish divergence warned stock traders that the recent price increases were lacking strong commitment by buyers.

Low #1 to Low #2

The stock price made higher highs, generally considered a bullish signal; however, the On Balance Volume technical analysis indicator made lower lows. Volume on down days was on average larger than volume on up days.

On Balance Volume is a valuable technical analysis tool that combines both price and volume to confirm price action or warn of potential weakness or lack of conviction by buyers and sellers. An arguably better measure than the OBV that combines volume and price movement is the Chaikin Oscillator (see: Chaikin Oscillator). Also, the Money Flow Index (see: Money Flow Index) uses price and volume in a more precise and realistic manner.

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Money Flow Index

The Money Flow Index (MFI) uses price and volume and the concept of accumulation distribution to create an overbought and oversold indicator that is helpful in confirming trends in prices and warning of potential reversals in prices. The inputs to the Money Flow indicator are given below:

1. Typical Price: (High + Low + Close) / 3
2. Money Flow: Typical Price x Volume
3. Positive Money Flow: The Money Flow on days where the Typical Price is greater than the previous day's Typical Price.
4. Negative Money Flow: The Money Flow on days where the Typical Price is less than the previous day's Typical Price.
5. Money Ratio: Positive Money Flow / Negative Money Flow
6. Money Flow Index: 100 - [100 / (1 + Money Ratio)]

The chart below shows the Money Flow Index in action:

Interpreting the Money Flow Index

• Below 20 is considered oversold; look for buying opportunities.
• Above 80 is in overbought territory; look for sell signals.

In the chart above of GOOG, the downtrend in price was confirmed by the downtrend in the Money Flow Index. Once the MFI entered the oversold area, traders would be advised to begin to reduce their short sell positions and buy to cover.

Later, the price of Google increased, and the MFI indicator confirmed that increase. This is a signal that the trend in Google still has buying pressure and that the stock trader should continue holding their long position in the stock.

In additon to being an excellent confirmation tool, the Money Flow Index can warn of potential price reversals. 

Money Flow Index Divergences

 Since the Money Flow Index uses volume in its calculation, this indicator can prove effective as a divergence indicator. The theory is as follows:

• If price is rising, and the volume on up days is greater than the volume on down days, then this is confirming of the price rise.
• Likewise, if price is falling and the volume on down days is greater than the volume on up days, then the recent downward trend in stock prices is confirmed.
• In contrast, if prices rise, yet the volume on the up days is less than the volume transacted on down days, then money is secretly pouring out of the stock; this is a bearish divergence.
• And similarly, when prices fall, but the volume on the down days is less than the volume on up days, then money is flowing back into the stock, a bullish divergence.

The chart below shows the effectiveness of the Money Flow Index in detecting bullish and bearish divergences:

In the chart above, beginning on the left, Microsoft's stock price is in a downtrend; however, the Money Flow Index is not going downwards, in fact, it is sloping upwards. This is a good illustration of a bullish divergence.

On the second half of the chart, Microsoft is making new highs, yet the Money Flow Index is making lower highs, a bearish divergence. Stock traders of MSFT would be advised to scale out of their position because money is flowing out of Microsoft stock.

Later, the price of Google increased, and the MFI indicator confirmed that increase. This is a signal that the trend in Google still has buying pressure and that the stock trader should continue holding their long position in the stock.

The Money Flow Index is a valuable technical analysis tool due to its ability to incorporate both price and volume into its calculations. The Money Flow Index is very effective in confirming price action and warning of future price reversals.

Other technical analyis tools similar to the Money Flow Index, is the On Balance Volume indicator (see: On Balance Volume) and the Chaikin Oscillator (see: Chaikin Oscillator).

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Aroon Indicator

The Aroon indicator is used to help traders know when a market is uptrending, downtrending, or is in a range-bound, trendless market.
Knowing when a market is trending is very useful, mainly because trend following technical analysis indicators are profitable during trending markets but cause losses during non-directional markets. Similarly, oscillators are extremely profitable indicators during range-bound markets, but perform very poorly during strong trending markets. The Aroon indicator can show which mode the market is in.
The chart shows the different modes of the market and how the Aroon indicator reacts to these different market modes:

Interpreting the Aroon Indicator

When the Aroon Down indicator (in red above) is above the 70 line and the Aroon Up indicator (in greed above) is below 30, then the market is trending downwards.
In contrast, when the Aroon Up indicator is above the 70 line and the Aroon Down indicator is below 30, then the market is trending strongly upwards.
When the Aroon Up and Aroon Down indicator move towards the centerline (50), then the market is entering into a consolidation period.
By varying the period length, the Aroon indicator can give long term indications of trend or short-term indications of trend. By default, the Aroon indicator is 25-periods (shown in the chart above), but a shorter time frame could be 10-periods.

Aroon Oscillator

The Aroon Oscillator is calculated by subtracting Aroon Down from the Aroon Up indicator. It is interpreted as follows:

• Above 50 is considered a strong up-trending market
• Below -50 means that the market is trending lower;
• Near 0 means that the market is in transition and not trending.

The chart below of the contract shows both the Aroon indicator and the Aroon Oscillator:

 The chart below of the contract shows how the Aroon Oscillator is interpreted.

A decrease of the Aroon Oscillator from above the 50 line shows that the uptrend is consolidating and is reversing direction downward. When the Aroon Oscillator hovers around the zero line over time, then the market is in a directionless period.
When the oscillator moves toward -50 from the zero line, the market is beginning to trend downward. And when the Aroon Oscillator is below -50, then the market is in a strong downtrend.
When the oscillator begins to move upward towards the zero line, the downward trend is slowing down and beginning to reverse direction.
In addition, when the Aroon Oscillator moves higher from the zero line, then the market is moving from a period of non-trending to a period of uptrending.
The Aroon indicator and Aroon Oscillator are extremely helpful tools for a trader to have and use; the Aroon indicator helps traders to determine when best to apply trending following indicators like Moving Averages (see: Moving Averages) and when best to use oscillator type technical indicators like Stochastics (see: Stochastics).

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Dow Theory

The ideas of Charles Dow, the first editor of the Wall Street Journal, form the basis of technical analysis today.

Dow created the Industrial Average, of top blue chip stocks, and a second average of top railroad stocks (now the Transport Average). He believed that the behavior of the averages reflected the hopes and fears of the entire market. The behavior patterns that he observed apply to markets throughout the world.

Dow Theory

Three Movements

Markets fluctuate in more than one time frame at the same time:
Nothing is more certain than that the market has three well defined movements which fit into each other.

• The first is the daily variation due to local causes and the balance of buying and selling at that particular time (Ripple).
• The secondary movement covers a period ranging from days to weeks, averaging probably between six to eight weeks (Wave).
• The third move is the great swing covering anything from months to years, averaging between 6 to 48 months. (Tide).

• Bull markets are broad upward movements of the market that may last several years, interrupted by secondary reactions. Bear markets are long declines interrupted by secondary rallies. These movements are referred to as the primary trend.
• Secondary movements normally retrace from one third to two thirds of the primary trend since the previous secondary movement.
• Daily fluctuations are important for short-term trading, but are unimportant in analysis of broad market movements.
   

Various cycles have subsequently been identified within these broad categories.

Dow Theory

Primary Movements have Three Phases

Look out for these general conditions in the market:
Bull markets

• Bull markets commence with reviving confidence as business conditions improve.
• Prices rise as the market responds to improved earnings
• Rampant speculation dominates the market and price advances are based on hopes and expectations rather than actual results.

Bear markets

• Bear markets start with abandonment of the hopes and expectations that sustained inflated prices.
• Prices decline in response to disappointing earnings.
• Distress selling follows as speculators attempt to close out their positions and securities are sold without regard to their true value.

Ranging Markets

• A secondary reaction may take the form of a ‘line’ which may endure for several weeks.
• Price fluctuates within a narrow range of about five per cent.

Breakouts from a range can occur in either direction.

• Advances above the upper limit of the line signal accumulation and higher prices;
• Declines below the lower limit indicate distribution and lower prices;
• Volume is used to confirm price breakouts.

Dow Theory

Trends

Bull Trends
A bull trend is identified by a series of rallies where each rally exceeds the highest point of the previous rally. The decline, between rallies, ends above the lowest point of the previous decline.
Successive higher highs and higher lows.

The start of an up trend is signaled when price makes a higher low (trough), followed by a rally above the previous high (peak):

Start = higher Low + break above previous High.

The end is signaled by a lower high (peak), followed by a decline below the previous low (trough):

End = lower High + break below previous Low.

What if the series of higher Highs and higher Lows is first broken by a lower Low? There are two possible interpretations - see Large Corrections.

Bear Trends

Each successive rally fails to penetrate the high point of the previous rally. Each decline terminates at a lower point than the preceding decline.

Successive lower highs and lower lows.

A bear trend starts at the end of a bull trend: when a rally ends with a lower peak and then retreats below the previous low. The end of a bear trend is identical to the start of a bull trend.
What if the series of lower Highs and lower Lows is first broken by a higher High? This is a gray area - see Large Corrections.

Dow Theory

Large Corrections

A large correction occurs when price falls below the previous low (during a bull trend) or where price rises above the previous high (in a bear trend).

Some purists argue that a trend ends if the sequence of higher highs and higher lows is broken. Others argue that a bear trend has not started until there is a lower High and Low nor has a bull trend started until there is a higher Low and High.
For practical purposes: Only accept large corrections as trend changes in the primary trend:

• A bull trend starts when price rallies above the previous high,
   
• A bull trend ends when price declines below the previous low,
   
• A bear trend starts at the end of a bull trend (and vice versa). 

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Elliott Waves Theory Basics

Elliott Waves Theory Basics

About Elliott Waves Theory Basics

The Elliott Wave Theory is named after Ralph Nelson Elliott. Inspired by the Dow Theory and by observations found throughout nature, Elliott concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves. In fact, Elliott believed that all of man's activities, not just the stock market, were influenced by these identifiable series of waves.

Elliott based part his work on the Dow Theory, which also defines price movement in terms of waves, but Elliott discovered the fractal nature of market action. Thus Elliott was able to analyze markets in greater depth, identifying the specific characteristics of wave patterns and making detailed market predictions based on the patterns he had identified.

Definition of Elliott Waves

In the 1930s, Ralph Nelson Elliott found that the markets exhibited certain repeated patterns. His primary research was with stock market data for the Dow Jones Industrial Average. This research identified patterns or waves that recur in the markets. Very simply, in the direction of the trend, expect five waves. Any corrections against the trend are in three waves. Three wave corrections are lettered as "a, b, c." These patterns can be seen in long-term as well as in short-term charts. Ideally, smaller patterns can be identified within bigger patterns. In this sense, Elliott Waves are like a piece of broccoli, where the smaller piece, if broken off from the bigger piece, does, in fact, look like the big piece. This information (about smaller patterns fitting into bigger patterns), coupled with the Fibonacci relationships between the waves, offers the trader a level of anticipation and/or prediction when searching for and identifying trading opportunities with solid reward/risk ratios.

There have been many theories about the origin and the meaning of the patterns that Elliott discovered, including human behavior and harmony in nature. These rules, though, as applied to technical analysis of the markets (stocks, commodities, futures, etc.), can be very useful regardless of their meaning and origin.

Simplifying Elliott Wave Analysis

Elliott Wave analysis is a collection of complex techniques. Approximately 60 percent of these techniques are clear and easy to use. The other 40 are difficult to identify, especially for the beginner. The practical and conservative approach is to use the 60 percent that are clear.

When the analysis is not clear, why not find another market conforming to an Elliott Wave pattern that is easier to identify?

From years of fighting this battle, we have come up with the following practical approach to using Elliott Wave principles in trading.

The whole theory of Elliott Wave can be classified into two parts:

•	Impulse patterns
•	Corrective patterns

 
Elliott Wave Basics — Impulse Patterns
The impulse pattern consists of five waves. The five waves can be in either direction, up or down. Some examples are shown to the right and below.The first wave is usually a weak rally with only a small percentage of the traders participating. Once Wave 1 is over, they sell the market on Wave 2. The sell-off in Wave 2 is very vicious. Wave 2 will finally end without making new lows and the market will start to turn around for another rally.



 
 
 
The initial stages of the Wave 3 rally are slow, and it finally makes it to the top of the previous rally (the top of Wave 1).
 
At this time, there are a lot of stops above the top of Wave 1.

Traders are not convinced of the upward trend and are using this rally to add more shorts. For their analysis to be correct, the market should not take the top of the previous rally.

Therefore, many stops are placed above the top of Wave 1.

The Wave 3 rally picks up steam and takes the top of Wave 1. As soon as the Wave 1 high is exceeded, the stops are taken out. Depending on the number of stops, gaps are left open. Gaps are a good indication of a Wave 3 in progress. After taking the stops out, the Wave 3 rally has caught the attention of traders.

The next sequence of events are as follows: Traders who were initially long from the bottom finally have something to cheer about. They might even decide to add positions.

The traders who were stopped out (after being upset for a while) decide the trend is up, and they decide to buy into the rally. All this sudden interest fuels the Wave 3 rally.
 

This is the time when the majority of the traders have decided that the trend is up.
 

Finally, all the buying frenzy dies down; Wave 3 comes to a halt.
 

Profit taking now begins to set in. Traders who were long from the lows decide to take profits. They have a good trade and start to protect profits.This causes a pullback in the prices that is called Wave 4.
 

Wave 2 was a vicious sell-off; Wave 4 is an orderly profit-taking decline.
 

While profit-taking is in progress, the majority of traders are still convinced the trend is up. They were either late in getting in on this rally, or they have been on the sideline.
 

They consider this profit-taking decline an excellent place to buy in and get even.

On the end of Wave 4, more buying sets in and the prices start to rally again.
 

The Wave 5 rally lacks the huge enthusiasm and strength found in the Wave 3 rally. The Wave 5 advance is caused by a small group of traders.
 

Although the prices make a new high above the top of Wave 3, the rate of power, or strength, inside the Wave 5 advance is very small when compared to the Wave 3 advance.
 

Finally, when this lackluster buying interest dies out, the market tops out and enters a new phase.

Elliott Wave Basics — Corrective Patterns
 
Corrections are very hard to master. Most Elliott traders make money during an impulse pattern and then lose it back during the corrective phase.
 
An impulse pattern consists of five waves. With the exception of the triangle, corrective patterns consist of 3 waves. An impulse pattern is always followed by a corrective pattern. Corrective patterns can be grouped into two different categories:

•	Simple Correction (Zig-Zag)
•	Complex Corrections (Flat, Irregular, Triangle)

 
Simple Correction (Zig-Zag) There is only one pattern in a simple correction. This pattern is called a Zig-Zag correction. A Zig-Zag correction is a three-wave pattern where the Wave B does not retrace more than 75 percent of Wave A. Wave C will make new lows below the end of Wave A. The Wave A of a Zig-Zag correction always has a five-wave pattern. In the other two types of corrections (Flat and Irregular), Wave A has a three-wave pattern. Thus, if you can identify a five-wave pattern inside Wave A of any correction, you can then expect the correction to turn out as a Zig-Zag formation.
 

Fibonacci Ratios inside a Zig-Zag Correction

Wave B

Usually 50% of Wave A Should not exceed 75% of Wave A

Wave C

either 1 x Wave A or 1.62 x Wave A or 2.62 x Wave A

A simple correction is commonly called a Zig-Zag correction.

Complex Corrections (Flat, Irregular, Triangle)
The complex correction group consists of 3 patterns:

•	Flat
•	Irregular
•	Triangle

Flat Correction
In a Flat correction, the length of each wave is identical. After a five-wave impulse pattern, the market drops in Wave A. It then rallies in a Wave B to the previous high. Finally, the market drops one last time in Wave C to the previous Wave A low.

Irregular Correction
In this type of correction, Wave B makes a new high. The final Wave C may drop to the beginning of Wave A, or below it.

Fibonacci Ratios in an Irregular Wave

Wave B = either 1.15 x Wave A or 1.25 x Wave A

Wave C = either 1.62 x Wave A or 2.62 x Wave A

Triangle Correction
In addition to the three-wave correction patterns, there is another pattern that appears time and time again. It is called the Triangle pattern. Unlike other triangle studies, the Elliott Wave Triangle approach designates five sub-waves of a triangle as A, B, C, D and E in sequence.

Triangles, by far, most commonly occur as fourth waves. One can sometimes see a triangle as the Wave B of a three-wave correction. Triangles are very tricky and confusing. One must study the pattern very carefully prior to taking action. Prices tend to shoot out of the triangle formation in a swift thrust.

When triangles occur in the fourth wave, the market thrusts out of the triangle in the same direction as Wave 3. When triangles occur in Wave Bs, the market thrusts out of the triangle in the same direction as the Wave A.

Alteration Rule:-   If Wave Two is a simple correction, expect Wave Four to be a complex correction. If Wave Two is a complex correction, expect Wave Four to be a simple correction.

Elliott Waves IN FLASH PLAYER

http://www.mediafire.com/download/6edn49j9e585lq8/1_ew_counts.exe

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Trading Methods

 

Trading Methods

There are several different trading methods that can be used to trade. Here three main popular trading methods given below:

1. Swing Trading

2. Day Trading.

3.Position Trading / Trend Trading.

1. Swing Trading

What is Swing Trading?

Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.

• Swing trading combines the best of two worlds -- the slower pace of investing and the increased potential gains of day trading.

• Swing traders hold stocks for days or weeks playing the general upward or downward trends.

• Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.

• By rolling your money over rapidly through short term gains you can quickly build up your equity.

How does Swing Trading work?

• The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
   
• Strongly trending stocks often make a quick move after completing its correction which one can profit from.
   
• One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
   
• In brief a Swing Trader's goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.

What are the advantages of Swing Trading?

• Swing Trading combines the best of two worlds -- the slower pace of investing and the increased potential gains of day trading.
   
• Swing Trading works well for part-time traders — especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn't require that type of focus and dedication.
   
• While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride "swings" in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.
   
• With day trading, the only person getting rich is the broker. "Swing traders go for the meat of the move while a day trader just gets scraps." Furthermore, to swing trade, you don't need sophisticated computer hook-ups or lightning quick execution services and you don't have to play extremely volatile stocks.

The Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.

How to Swing Trade?

To fully understand what swing trading really is, you first need to understand what up/down trends are.
Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last "swing" in the trend will serve as support for the next low. These areas are circled.
Down Trend: Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last "swing" in the stock's trend will serve as resistance for the next high. These are circled.

Long Swing Trades: Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.
Short Swing Trades: Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.

2. Day Trading.

What is Day Trading?

• Day Trading involves taking a position in the markets with a view of squaring that position before the end of that day.
   
• A day trader typically trades several times a day looking for fractions of a point to a few points per trade, but who close out all their positions by day's end.
   
• The goal of a day trader is to capitalize on price movement within one trading day.
   
• Unlike investors, a day trader may hold positions for only a few seconds or minutes, and never overnight.

What day trading really means.

The term "day trading" is a widely misused and misunderstood term. Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock market is closed due to news that can affect the prices of your stocks.

Unfortunately, many people who claim to be "day trading," hold stocks overnight because of fear or greed, thus setting themselves up for the catastrophic elimination of their capital. When day trading currencies, the term "day trading" changes slightly. Since currencies can be traded 24-hours-a-day, there is no such thing as "overnight" trading. Thus, you can have open positions for longer than a day with active stop losses that can be activated at any time.

Day trading can be further subdivided into a number of styles, including:

• Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small per share profit on each transaction while minimizing the risk.
   
• Momentum Traders: This style of day trading involves identifying and trading stocks that are in a moving pattern during the day, in an attempt to buy such stocks at bottoms and sell at tops.

Advantages of Day Trading

• Zero Overnight Risk: Since positions are closed prior to the end of the trading day, news and events that affect the next trading day's opening prices do not effect your portfolio.
   
• Increased Leverage: Day Traders have a greater leverage on their trading capital because of low margin requirements as their trades that are closed in the same market day. This increased leverage can increase your profits if used wisely.
   
• Profit in any market direction: Day trading often will utilize short-selling to take advantage of declining stock prices. The ability to lock in profits even as markets fall throughout the trading day is extremely useful during bear market conditions.

3. Position Trading | Trend Trading

What is a Trend?

A trend is nothing but the general direction of the price of an asset or market in general.
A trend can apply to equities, bonds, commodities and any other market which is characterized by a long-term movement in price or volume.

What is Trend Trading?

• Trend trading is one of the most effective and easy to use methods for making money in the market. Trend trading success depends on identifying and catching the trend after it has started and getting out of the trend as soon as possible after the trend reverses.
   
• Trend Trading involves taking a position in the markets with a view of holding that position for weeks to months for larger than normal gains. Trend traders or investors generally trade the long term or secular trends and are not concerned with the day to day market volatility.

Advantages of Trend Trading?

• Trend trading is the fastest and most risk free way to make money in the markets. In trend trading you can identify a change of trend in the market as early as possible, take your position, ride the trend and close your position shortly after the trend reverses.
   
• With Trend Trading it is very possible to catch 60 to 80% of many intermediate term and long term market movements and thus create wealth for yourself and your family.
   
• Trend Trading will help you take large profits out of the market, without having to watch the market or stocks on a minute-by-minute or even a day-by-day basis.
   
• Whether you are a short-term day trader or a long-term investor, we believe incorporating Trend Trading into your overall trading plan is a must. There are two types of trades: "Income producing" trades and "Wealth-building" trades. Swing trading and day trading produce income, while Trend Trading Picks is designed to amass wealth. 

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Time frames

Principles of technical analysis remain same irrespective of time frames.

This means that the all indicators can be applied uniformly across all time frames - intraday, daily, weekly, monthly, quarterly etc.

Having said this, a word of caution is in order. One shd always identify the broader trend (pricewise/ timewise) and use that to decide action for the shorter trend.

For eg., if the daily or weekly trend is bullish, one shd lean more towards long positions in daytrading than towards the short side.

Similarly if the broader trend is down, one shd look to build short positions on any significant rise.

A word of advice: a smaller time frame is more prone to manipulation as compared to a broader time frame. For eg., daily/ intraday trends can be misleading but it is almost impossible to manipulate the broader trend (say a 6 month bull run).

Lastly, shorter time frames (eg. intraday, daily) tend to be extremely volatile and choppy. Most technical indicators, with the exception of support / resistance levels and trend lines, will give confusing results. 

Multiple Time Frame Technical Analysis

Perhaps one of the most important things to learn about in technical analysis is how to properly utilize more than one time frame to gain a clear picture of the markets. Most traders don't ever bother learning the details of how they specifically should do this given their trading plan and trading methods. Whatever your method may be, learning this skill is a critical part of trading.
Let's compare this to something outside the trading world--a newspaper. Being from Chicago, I hate using this as an example but it is one of the best examples that comes to mind: Last weekend's sports headline was "Packers Win The Superbowl". If continued to read the text below the headline, it was slightly smaller in size and said "Aaron Rodgers named Super Bowl MVP". It then gave some more information, in even smaller font, talking about the score of the game, some key plays, and then referenced another page inside the paper to continue reading on. Once I went to this page, I was greeted with even smaller font, which went into great detail on virtually every aspect of the game. It's as if the entire game was summarized in this entire page of small text.
Now, let's step back into the world of trading and take a look at how this can compare to the markets and more importantly how it compares to multiple time frame technical analysis. The specific time frame that you utilize will depend on your trading style and market, which is something we talk much more about within the Price Action Course. However, for this example, we are going to assume there are 4 time frames: the weekly chart, the daily chart, the hourly chart, and the 5 minute chart.
Let's compare how each of these charts is similar to the newspaper. The weekly chart conveys very little information--with each candle representing one week worth of data. This is very similar to the huge headline "Packers Win Superbowl" because it gives us a great amount of information, however it does not give us detailed specifics on how this happened.
Next we move on to the daily chart, which gives us 5 times the information of the weekly chart. This is because each candle represents 1 day instead of 1 week. This is very similar to the headline "Aaron Rogers named MVP" because we now learn more information about how the Packers won the Superbowl--with Aaron Rogers playing a critical role. This is similar to the daily chart because it provides more details on how price moved, but it still doesn't tell us the exact specifics of what happened.
Moving on we now look at the smaller font below the headline. Now we are getting into the meat and potatoes of what happened in the Superbowl--understanding the score, key plays, and other critical players. This is similar to the 1 hour chart, which conveys far more information than the daily chart. This chart tells us exactly what happened during that one given day--information we didn't receive from the daily chart.
And lastly, we move into the middle of the newspaper, where we find virtually every single detail of the game--as much detail as if we had watched the game on TV. This is similar to the 5 minute chart--here we can see just about every tick and movement and understand each individual price movement on a micro basis. This can show us exactly how price responded to various areas and gives us a "play by play" analysis of what is happening in the markets.
So now that we understand each time frame and how they are related to the main story, we need to fully understand how to combine all these time frames together to achieve the best and most profitable outcome. Unfortunately this isn't an easy task by any means, however it is something we touch on quite regularly throughout the price action course. I really wouldn't be giving this topic justice if I tried to explain it in a few lines of text, so I reserved this more advanced concept to be embedded throughout the 7 hours of video within the course. In short, there are several different setups and different ways to combine these charts to have an efficient and effective outcome.
Remember--what chart you use is determined by the type of trader that you are as well as the market which you are trading. There are certainly some generalities that exist from trader to trader in terms of time frames, however it can also vary greatly from one trader to another. The most important thing is to make sure you are using multiple time frames and if you aren't you definitely need to learn more about how to combine charts to gain the most important data from the markets.

Summary

Markets often trend in more than one direction at the same time: The Dow can be in an upward bull trend (which may endure for several years); while the secondary cycle corrects downwards over several months; and a short-term rally occurs during the current week.

Market cycles may include:

• Long-term (or primary) trends that are measured in years;
• Intermediate (or secondary) trends of 3 weeks up to 6 months;
• Short-term cycles of less than 3 weeks; and
• Intra-day cycles.

What is important to remember is that long-term trends influence short-term trends.
In an up-trend, rallies tend to be stronger than corrections. In a down-trend, corrections are mostly stronger than rallies.

Unusual conditions can be created by the interaction of cycles in different time frames. They may offset each other or they may overlap and act in the same direction, resulting in an extreme peak or trough.

Chart Analysis

Avoid becoming hypnotized by movements on daily or intra-day charts. Always analyze charts in at least 3-5 time frames:

1. Determine the strength and direction of longer term trends and gauge their effect on the cycle being traded.
2. Then analyze the cycle being traded.

Estimate the length of cycles by measuring the time taken between consecutive peaks (or troughs).

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