The Master Trader top-down method of stock market analysis is a comprehensive approach that starts with a Techno-Fundamental perspective and narrows to individual stocks.
Master Trader uses a Top-Down method to educate students through courses and letter memberships.
In this Chart of the Week, we'll discuss
What is Technical Analysis, and How to Use it?
Everyone using technical Analysis has the same goal. Predict the future price movement of the tradable instrument.
The Analysis begins with a price chart of stocks, commodities, ETFs, currencies, or cryptocurrencies. The Analysis is the same across all instruments.
The first step in the Analysis should be, are prices moving up, down, or sideways?
Many will attempt to determine the direction of prices and direction changes using analysis tools like diagonal trendlines, moving averages, or other tools.
Most would then determine where support (prior demand) and resistance (prior supply) is within the trend.
Technical Analysis assumes these support and resistance points are where buyers and sellers will focus on prices stalling and possibly turning. Pretty simple, right?
Charting platforms provide tools like Fibonacci retracement lines, extensions, arcs, Speed lines, Gann Lines, Vwaps, Channels, Tirone Levels, and others to locate where support and resistance are. It's getting complicated!
The platforms also provide technical indicators (mathematical calculations) to determine entry points, trends, and what to think based on one or more indicators. Some common indicators are RSI, MACD, Stochastics, and Williams.
Master Trader offers a Simpler Approach to Technical Analysis.
Technical Analysis is the art of reading others' thoughts, beliefs, and actions created with money.
Master Trader Technical Strategies (MTS) builds on the fact that investors and traders create charts, and the chart reflects cumulative beliefs.
If buyers' beliefs are stronger than sellers', the trend will be up and vice versa.
MTS Technical Analysis assumes when price retests a price area within an uptrend where buyers were before, they will buy at that area again, and that is where to buy also. And vice versa in a downtrend.
MTS's simpler approach also assumes if prices do not pull back to retest, instead, they move sideways, buyers (demand) are strong, and breakouts will move higher.
We are building a "Thought Process," the next question is, where will prices increase? Simple, the next point of price resistance.
How to determine where the next area of price resistance is? That is simple also; by Looking to the Left side of the chart.
What if there isn't any price resistance? That is what we call a Price Void.
For example, the simplest understanding of a Void of Resistance would be a stock making new all-time highs. There is nothing to the left.
While it could happen, we should not assume that prices will go up or down forever and that trends can change. So, we need a simple way to define change.
Master Trader Technical Strategies (MTS) defines a break of a downtrend as a close above the high previous to a lower low.
An uptrend ends on a close below the low previous to a higher high.
The Master Trader Swing Trading course builds on the thought process above to define candlestick patterns for entries, exits, position and money management, how to keep a trading journal, and trader psychology.
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The Advisory Swing and Options Letter shows you how to use Techno-Fundamentals, how to scan sectors, stocks and provides trade ideas. New trades with the technical setup and management updates are sent intra-day by text message to subscribers until the trade is closed. The Video is from the letter.
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com