Trading Tips

The world of technical indicators is dominated by grizzled veterans who got their starts in the 1960s and 70s. But among these “middle-age” indicators, there is one promising young buck, and its name is Aroon.

Invented in 1995, “Aroon” is actually a word in the ancient Indian language of Sanskrit, which means “dawn’s early light.” This is because the Aroon indicator is designed to reveal the beginning of a new trend.

Now, before I get much further, I should clarify that saying “the” Aroon indicator is a bit misleading, because each stock actually has two Aroons — an Aroon-Up and Aroon-Down. Is this confusing? Well, watch the video, and I assure you it will all make sense — and dollars, too, if used correctly.

In this episode, you’ll learn:

- What Aroons measure and how chartists use them to anticipate new trends, price consolidations, corrections, and reversals (1:02).

- How Aroons are calculated (1:57).

- How to interpret Aroon-Up and Aroon-Down (3:06).

- How to add Aroons to your own charts — this is actually a little bit tricky, so be sure to watch all the way until the end of the video! (4:06).

This video also includes a detailed, real-life example of the S&P 500 with an Aroon indicator underlay.

In this episode, you’ll learn what the Aroon indicator is, how it’s used, how it can be interpretted, and finally, how you can add it to your own charts. Like any other indicator, Aroons can only be mastered with practice, but this video will definitely give you what you need to get started.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll look at Volume by Price, which is an indicator that shows the amount of volume for a particular price range. Until next week!

Episode 69 — The Aroon Indicator

Options offer traders lots of… well, options! Call options provide the opportunity to leverage your profits when a stock goes up; put options allow you to make money as a stock goes down. What’s more, you can even write covered calls on stocks that you hold in order to provide low-risk income, and you can use puts as a form of “insurance.”

Options are great, but they’re not for everybody — and they’re not the subject of this week’s episode. However, the Put/Call Ratio is. It may sound as if it has to do with options, and it does: but it can be used to inform your stock trades. In this episode, I’ll explain how.

In this episode, you’ll learn:

- About puts and calls: a brief review or introduction for those not familiar with options (0:37).

- What the Put/Call Ratio is, how it’s calculated, and how it can be read (1:17).

- The different “universes” of options that can comprise a Put/Call Ratio, and the specific characteristics of each (1:50).

- How to interpret the Put/Call Ratio to determine if the market is oversold, overbought, or neither (2:25).

This video also includes real-life examples of Put/Call Ratios using all three major “universes” of options: the $CPCI, the $CPCE, and the $CPC. Confused? Watch the video and you’ll understand!

The Put/Call Ratio measures put volume relative to call volume. This can help you determine if the market appears to be overbought, oversold — and to what extent — or neither. Ingeniously, it also allows you to gauge how the sentiment of professional traders compares to that of amateur traders, and how the two synthesize to form an overall consensus. Best of all, this indicator is easy to read and understand — once you learn a few basic rules, all of which are covered in this episode.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll look at the Aroon indicator, which helps determine if a stock is trending or range-bound. Until next week…

Episode 68 — Put/Call Ratio

The topic of this week’s TradingTips.com video newsletter is Price Channels. These technical overlays work similarly to Stochastics, but are much simpler and straightforward… And in this case, simpler is most definitely better.

The basic idea behind Price Channels is to look at the periodic highs and lows of a stock, and see where the current price is in relation to these markers. The tricky thing is the interpretation, and that’s what this video focuses on.

In this episode, you’ll learn:

- What Price Channels are and how they are calculated

- The practical applications for Price Channels and how they’re properly interpreted

- How to add Price Channels to your own charts

This video also includes a real-life chart of the S&P 500 with Price Channel overlays to aid in your recognition and interpretation, and a screen shot showing you exactly how to add Price Channels to your own charts.

Price Channels can help you to predict price trends and identify overbought or oversold conditions. However, context is key: you need to know the rules for how to interpret whether a surge should be considered a bullish breakout or a sign that a stock is overbought. No technical indicator is foolproof, but after watching this video, you should have a basic grasp on how to use Price Channels to better inform your trades.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll be looking at a market indicator known as the put-call ratio. It’s based on options but can be very effective in trading stocks. Tune in next week!

Episode 67 — Price Channels

Volatility. It’s important. And accordingly, there are several technical indicators that are designed to measure it. However, many of these tools are flawed. How? Because they miss what J. Welles Wilder called “Hidden Volatility.”

What is “Hidden Volatility?” The best way to explain it is with an example. Let’s say a stock closes at $50 a share on Monday. Then on Tuesday, it opens at $50.10, falls to a low of $45.09 (down 10%) by noon, surges to an intraday high of $52.60 at 3pm, and then crashes to close at $49.99 by the day’s end. That’s a lot of volatility, right? Yes, but if you’re only looking at the closing prices, the stock has had very little volatility: its previous close was $50.00, and its new close was $49.99 — all the intraday volatility is “hidden.”

Average True Range was designed by J. Welles Wilder to sniff out all of this “Hidden Volatility,” and it is the subject of this week’s TradingTips.com video newsletter.

In this episode, you’ll learn:

- What is meant by “True Range” (TR) and how it is calculated (1:09)

- How ATR (Average True Range) is calculated (1:34)

- How ATR can predict future volatility — and how it DID predict the huge “flash crash” of May 6 (1:59)

- The one major drawback of ATR, which necessitates the use of other volatility gauges (2:27)

This video uses real-life charts to make the examples come to life. You’ll see, first-hand, how ATR predicted the huge May 6 flash crash: using ATR could have saved you a bundle!

The purpose of ATR is to measure “hidden” volatility — the type of volatility that is often missed by other measures of volatility. This can be very useful in predicting an increase in intraday volatility. However, there is one major drawback to using ATR, which is detailed in this episode. No one technical indicator can ever “do it all,” which is why it’s important to have many in your arsenal. After watching this video, you’ll have one more!

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll be looking at Price Channels, a technical statistic that is similar to Stochastics, but with several distinct advantages. Be sure to tune in!

Episode 65 — Average True Range: A Gauge for Finding “Hidden Volatility”

Moving Average Envelopes are simple but effective indicators — it’s surprising they aren’t more widely understood and used. This, however, can be used to your advantage. By being one of the comparatively few traders who knows how to use Moving Average Envelopes, you’ll have a secret weapon at your disposal!

This episode of the TradingTips.com video newsletter thoroughly explores Moving Average Envelopes. Beyond that, it shows you how to add them to your stock charts, and offers a couple of different ways they can be used. For more on what this episode covers, read on.

In this episode, you’ll learn:

- What Moving Average Envelopes are — with a real-life example (0:37)

- How to set up Moving Average Envelopes (1:08)

- The “trickiest” problem when setting up your Envelopes — and how to solve it (2:08)

- How to interpret Moving Average Envelopes (3:00)

This episode also contains several thoroughly annotated charts as examples, and tells you how to read Moving Average Envelopes in trending and flat-trading markets.

Moving Average Envelopes are simple and effective — but they require a little more work than most “one-size-fits-all” indicators. No matter: with a little experimentation and back-testing, you can produce a reliable indicator that could mean the difference between profitable and unprofitable trading.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll be looking at Average True Range (ATR), an indicator reference in this episode. Be sure to tune in!

Episode 64 — Moving Average Envelopes: Simple But Effective Trend Indicators!

Ichimoku Kinko Hyo: The name sounds intimidating to those unfamiliar with Japanese, and a quick glance at the formula makes this indicator seem far more complex than it is. In reality, though, the Ichimoku Cloud is a simple, straight-forward, and very revealing technical indicator. In fact, it might be the most single versatile and effective indicator available!

The Ichimoku Cloud was invented by journalist Goichi Hosada in 1969. This was an age before there were computers in every room of the house, so you know it can’t be that complex. And remember, Hosada was a journalist, not a mathematician or computer scientist. The Ichimoku Cloud’s calculations are deceptively simple, and when put together, they synthesize data in an amazingly effective way. In fact, the most surprising thing is that the Ichimoku Cloud is not more widely known: But you can use this to your advantage!

In this episode, you’ll learn:

- What “Ichimoku Kinko Hyo” means, and what the Ichimoku Cloud can do for you (0:33)

- The five plots on the Ichimoku Cloud (0:58)

- How Ichimoku Clouds are calculated (1:28)

- How Ichimoku Clouds can determine a stock’s trend “at a glance” (2:32)

This episode also shows features an in-depth example of a stock chart with an Ichimoku Cloud overlay, and tells you how you can add Ichimoku Cloud overlays to your own stock charts — for free.

The Ichimoku Cloud is effectively a chart onto itself. By using it as an overlay at StockCharts.com, you can define support and resistance, identify trend direction, measure momentum, and more. Be sure to watch this episode in full to get the most out of Ichimoku Clouds.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll be looking at Moving Average Envelopes. Be sure to tune in!

Episode 63 — DPO: Detrended Price Oscillator Removing Trend from Price to See Observe Stock Cycles!

As is often repeated in TradingTips.com videos, you have to use more than one technical indicator to inform your trades. If a stock has a bullish MACD, for example, you also need to check to make sure it’s not in some sort of bearish chart-pattern formation, or that it doesn’t have a bad-looking PPO, etc. No one indicator or pattern can be the “be all, end all.”

This potentially leads to a problem, though: “analysis paralysis.” Traders can get so wrapped up testing plays against various indicators that, by the time they’re done screening, the play is no good. Even longer-term traders are subject to having their judgment obfuscated by redundancy and noise, when ultimately, most technical indicators are designed to measure the same thing: the price trend of a stock.

But with so many indicators saying the same thing and often sending mixed signals, shouldn’t there be some indicators that attempt to measure something other than price trend? There are, of course, and in today’s episode we’ll look at one of the most unique to be found: the Detrended Price Oscillator, or DPO.

In this episode, you’ll learn:

- What DPO is and why it is so unique and valuable (0:37)

- The formula for DPO, explained with easy-to-understand examples (1:11)

- How “offset SMA” — a key component of DPO — works, and how it looks on a stock chart (1:53)

- How DPO can be used to filter out longer-term trends to focus on shorter cycles (2:53)

This episode also shows you exactly how to add DPO to your own stock charts, using StockCharts.com. The good news is that it’s free, too. We also look at two real-life examples of stock charts with DPO underlays.

DPO does not directly predict the direction of a stock. Instead, it estimates the length of a stock’s cycle. If a stock has been experiencing 20-day cycles, wherein it is hitting new highs and lows within the cycle approximately every 20 days, DPO will eliminate general price trend from the analysis and help you identify this. This can do more to inform your trading than perhaps anything else.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next video, we’ll be examining Ichimoku Kinko Hyo, which translates from Japanese into “one-look equilibrium chart.” With just one look, chartists can identify the trend and look for potential signals within that trend. Sound good? Then tune in next week!

Episode 62 — DPO: Detrended Price Oscillator Removing Trend from Price to See Observe Stock Cycles!

In early July, the market experienced a Black Cross — also known as a Death Cross. Should you be concerned? This video seeks to answer that question.

But before we can answer that, we have to know what a Black Cross is… And what about its inverse, the Golden Cross?

This video looks at Black and Golden Crosses, what they are, what they tend to mean for the market, and how accurate they’ve been at predicting big gains or losses over the past 11 years.

In this episode, you’ll learn:

- What a black cross is (0:45)

- How accurate the past five Black Crosses have been (1:05)

- How accurate the past four Golden Crosses have been — and what a Golden Cross is (2:30)

This episode also takes an in-depth look at the most recent Black Cross, which took place in early July. The market is actually up around 13% since that Black Cross took place: Does this mean it was a false signal? Watch and find out.

Historically, the Black Cross has been a fairly accurate predictor of massive stock market losses, but even when it’s been wrong, the gains have been comparably minimal. The Golden Cross, on the other hand, has yet to be wrong in four instances over the past 11 years. Watch this video to find out exactly what each of these terms mean, and to know when we might experience another Golden Cross.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. Watch the Presentation: Secret $200 Retirement Blueprint

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It’s happened before, but could it happen again and could it happen to you?

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Episode 61 — Black Cross/Golden Cross: Long-Term Moving Average Crossovers That Make Big Predictions!

Do you know Michelle Williams, the actress? She was on Dawson’s Creek, and in the movies Halloween H20 and Brokeback Mountain — the blonde girl.

Well, did you know that she once won the World Cup Championship of Futures Trading using the statistical tool her dad created, Williams %R? She did!

I can’t promise you that you will become a world championship trader after watching this TradingTips.com episode, but if Williams %R could make a Hollywood actress an elite trader, what can it do for you?

In this episode, you’ll learn:

- what Williams %R is and what it signals (0:48)

- all about the great Larry Williams, father of Michelle and inventor of Williams %R (1:34)

- Larry Williams’s rules for buying and selling using Williams %R (2:06)

- how to use Williams %R as a counter-intuitive momentum indicator (3:25)

This episode also features an in-depth, real-life chart example of how to trade Williams %R. Everything is explained in great detail, so if Williams %R has always mystified you before, you’ll pick it up quickly in this video.

Williams %R can be used to determine if a stock is overbought or oversold, OR it can be used as a momentum indicator.

This is a multi-faceted trading tool that you absolutely MUST have in your arsenal. Using it, Larry Williams turned $10,000 into $1.1 million in one year — that’s a gain of more than 11,000%!

And he tutored his daughter well enough for her to win one of the most prestigious real-money trading contests in the world. This is one episode you absolutely don’t want to miss!

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. Can you really secure an average of $250 in as little as 15 minutes a day? With this system, I believe you can:

http://www.FirstHourTrading.com/details.html success rate of approximately 75%.

Episode 61 — Using Williams %R: A Great Momentum Indicator!

Last week, we looked at the Hindenburg Omen, and in doing so, we touched on another obscure technical indicator: The McClellan Oscillator.

The McClellan Oscillator is a unique and easy-to-read statistic you can check at the end of every trading day to give you direction moving forward. The only problem is, you need to understand how to read and interpret it. This video will teach you all you need to know.

In this episode, you’ll learn:

- The history of the the McClellan Oscillator, and how it works (0:38)

- The formula for the McClellan Oscillator (1:08)

- What the McClellan Summation Index is, and how it relates to the McClellan Oscillator (1:29)

This episode also looks at a number of charts to better explain the concepts behind the McClellan Oscillator: MSI, “Daily Breadth,” the Advance/Decline line, and other concepts, and it shows you how to look up the McClellan Oscillator online, for free.

By using the McClellan Oscillator, you can easily gauge the rate of money entering or leaving the market and whether conditions look overbought or oversold. Used in conjuction with various other indicators detailed in earlier TradingTips.com video newsletters, this can be quite powerful.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. Even as the market stages an impressive rally, there is still a lot of gloom-and-doom talk. Next week, we’ll look at an indicator that’s even more ominous than the Hindenburg Omen, and decide if we should be worried. Stay tuned!

Episode 59 — The Hindenburg Omen: Is the Market Telling Us a Crash is on the Horizon?