The Importance of Trading Rules (Quick thread)

What is Relative Strength (RS) and how to identify it (Thread)

Focusing on stocks exhibiting strong Relative Strength is one of the keys to achieving superior returns. This is one of the core ideas of #CANSLIM

In one sentence showing RS means outperforming other stocks both during market uptrends and downtrends.

In this thread we will cover examples, how to spot it, and how to use it to make sure you are in the top stocks.

If you want to outperform the indexes, logic says you have to be invested in stocks doing the same.

First Some Basic Terminology:

RS Rating: @IBDinvestors Proprietary measure of RS scored 1-99. Stocks with an RS rating of 80 have outperformed 80% of stocks over the past year.

RS Line: The Line plotted by dividing each day’s stock price/ price of the SPX.

The value of the RS line itself does not mean anything, but the trend of this line is very important.

-Note RSI (Relative strength index) is something completely unrelated to the concept of this thread.

“Sudden rises in price and volume, out of the ordinary relative strength, and movement against the general market trend are all giveaway signals which reveal the presence of a stock about to take off”

Nicolas Darvas

5 Ways Weekly Charts can help your Trading & Investing

📈📉 (Thread)

Weekly charts are a powerful timeframe, and regardless of your style, they can help you gain perspective on a particular setup and identify its potential

Using higher timeframes slows the action down and allows you to calmly analyze price and volume.

This will lead to better decision making.

For investors learning to analyze weekly charts and their trends can only complement your fundamental analysis.

For traders they are the "prevailing wind" and trading with this weekly trend will increase probabilities and help you remember to focus on larger patterns

1⃣ Weekly Charts show the True Trend of a Stock

Weekly charts eliminate a lot of the back and forth that occurs intraday and on daily charts. What is left is often a clear picture of the trend of a stock.

⬆️ Trending Up
↔️ Basing
⬇️ Trending Down

A brief introduction to trading/investing for beginners and why you should start right now (Thread)

A goal of mine is to introduce as many people as possible, especially my own age, to sound methods of how to trade/invest for their futures. Despite the stock market being open to all, in practice, not everyone is taught the value of it or how to use it to build wealth over time

This thread will hopefully help remove the knowledge barrier of how to get started. It will cover briefly:

Why you should invest (Start now!)
What even is stock?
Roth IRAs versus Traditional IRAs
ETFs+ Mutual Funds
How to buy/sell individual stocks.
Types of Investing/Trading

Now before we go further, I am not a financial advisor, I am speaking from my own experience and there are significant risks with the stock market so please consult a financial professional before getting involved. Alright let’s get to it.

First, why should you get involved and start ASAP, like tomorrow. The simple answer is compound interest and time.

8 Chart Patterns by William O'Neil

Let's break them down one by one🧵

Perhaps the most famous basing pattern found in the market is the Cup with Handle pattern.

✅ Chart resembles a cup with a handle
✅ Base length: Minimum 7 weeks
✅ Base depth: 20-30%
✅ Buy point: high of the handle
✅ Handle length: 1 week
✅ Handle depth: no more than 15%

There is also a Cup without Handle pattern.

✅ Chart is just a cup, no handle
✅ Base length: Minimum 7 weeks
✅ Base depth: 20-30%
✅ Buy point: High of left side of cup

The Double Bottom chart pattern is also very common & is one of the most powerful patterns to learn.

✅ Base resembles a "W"
✅ Base length: Min. 7 weeks
✅ Base depth: < 40%
✅ Buy point: middle of "W"
✅ Second low must undercut first low

The Flat Base pattern is another well known structure coined by William O'Neil.

✅ Base resembles a shallow consolidation
✅ Prior uptrend must be greater than 30%
✅ Base length: Minimum of 5 weeks
✅ Base depth: < 15%
✅ Buy point: High of structure

In the fall of 2018, I signed up for a class called "Introduction to the Stock Market and Technical Analysis" taught by Dr. Eric Wish

This class changed my life.

Here are 10 Lessons Dr. Wish taught me from his over 50 Years of Trading.

(Thread)

Before this class I had absolutely no knowledge about investing, trading, or how to read a stock chart

Today, trading & studying the commonalities between the greatest performing stocks is my passion, and what I’ve spent the past 1000+ days focused on

Now onto the first lesson

Financial Literacy

The first lesson Dr. Wish taught me was the importance of overall financial literacy.

Roth IRAs, interest rates, budgeting, building credit the right way.

You need to master money management before thinking moving on to trading/investing.

Overall Strategy

Throughout the class, Dr. Wish repeated his trading mantra.

As you gain trading knowledge and experience, you'll appreciate the simplicity and depth of this one sentence:

Determine the Market Trend

The vast majority of stocks follow the overall trend of the market. This is why the mantra begins with “In a Rising Market”

"At least 50% of the whole game is the general market."

-William O'Neil

What to do if you are not trading well. (Thread)

Impatience and instant success are built into our minds from the get-go. We want instant wins and instant rewards.

This has as much to do with our psychological build-up as it does with the society we live in.

In this thread, we will cover:

What to do if you are not trading well.
How to stop the drawdowns when no progress is being made.
How to have a systematic process that protects you from yourself.

So what is it that drives us?

We all want the market to reward us for our hard work, the effort, and time we put into it.

We want input to equal output.

However, there is no such thing as input = output in trading.

Trading is about consistency, persistence, and hard work without the certainty of any reward.

The best traders take advantage of alternate entries to build positions before a stock becomes obvious to the crowd.

Here are 7 lesser known Chart Patterns that are a MUST in any trader's tool box 🧵👇

#1: Alternate Pivots

Alternate pivots offer earlier entries when compared to regular pivots.

These pivots are important because:

▪️ They offer the same if not better R/R then regular pivots
▪️ Less volatility around these areas
▪️ Allow you to start positions EARLIER

#2: High Volume Close (HVC)

The HVC is created from a big volume gap up.

The close of this day is an important point for institutions to support.

If institutions are in supporting this point, price should be very responsive - making it a great, lower risk entry.

#3: Pivot Retest

The pivot retest setup happens when price retests the prior support/resistance point & then rallies back through.

This can be a powerful setup as it acts as a 'shakeout' and reverses higher with stronger hands holding the name.

#4: In The Wick Setup

We are looking for stocks that open in the wick of the prior session's bar.

The buy trigger is when price moves through the prior day's high.

The stop loss should be the low of the current day.