TA Cheat Sheet: I drafted this after a discussion with a friend about assessing what could be healthy fluctuations in price versus an absolutely damning (yet avoidable) loss due to an impending downtrend.
We all experience some anxiety when we enter a trade, and find that it immediately dips in price. These are the signals and indicators I use to determine entry/exit, normal/adverse trend behavior, and maintain my sanity while a share price ranges arbitrarily.
The chart shown is a 3Mo/1D (Rng/Int). I start with this view and scale out as far as 2Yr/1Mo for a broader view of the trend. I use an 8-day EMA as a buy/sell signal line; when price crosses above EMA8, I look for increased volume and bullish MACD convergences...
to confirm the trend, and inform a confident entry with a high probability of continuation. I then invert this strategy to plan my exit; as price crosses below EMA8, I look for decreased volume and bearish MACD convergences, and tighten my stop-loss to protect profit.
I apply 20, 50 and 200-day SMAs to act as key supports and resistances in relation to the current share price. Much like MACD convergence/divergence, I am looking for SHORT SMAs to cross above/below LONG SMAs (SMA50 cross above SMA200, SMA20 cross over SMA50, etc.)
Again, MA signals must be combined with an assessment of VOLUME for better confirmation of trend and expected behavior. I save RSI as a last resort indicator, as trend behavior can sometimes ignore overbought/oversold signals, and proceed to do whatever it wants....
Some may waste what would be an ideal entry waiting for an oversold RSI signal that never arrives, only to see the security maintain a modest, or overbought RSI (say 40-60) before entering an uptrend with even higher-highs than before. Again, this can be determined by VOLUME.
If you’re in a position that is approaching a heavily overbought RSI, this is an excellent time to tighten your stop-loss, and allow the position to continue running. If you’re stopped out – enjoy the profits. If your stop is untriggered, tighten up, and enjoy the ride!
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