Monday, September 21, 2020

How To Identify Market Strength And Weakness In Real Time


I recently posted on the topics of training for trading success and the factors that lead to success among developing traders.  Here is an example from my own trading.  

TraderFeed readers are familiar with the NYSE TICK measure that identifies how many stocks in the NYSE universe are trading on upticks versus downticks at any given moment.  It's a great real time measure of market strength and weakness.  How price responds to the upticks/downticks is just as important as the absolute value of TICK.

On the top chart (from Sierra Chart, Friday's market), you'll notice a TICK measure specific to the NASDAQ 100 Index.  On the bottom chart, is a TICK measure for the Russell 2000 Index.  I've drawn yellow arrows to show the divergence between the TICK readings for the two indexes around 10:16 AM.  There was also a divergence between the TICK readings for the Dow 30 Index and the Standard and Poor's 500 Index.  By looking at TICK measures specific to each index, we can identify strength and weakness in real time.

I review these patterns each day and find ones associated with trading opportunities.  The continual review--and the focus on unique, informative measures--has greatly helped the consistency of my trading.  For a while, my trading performance was lagging.  It was when I doubled down on one of my strengths--pattern recognition--that I was able to identify and exploit new opportunity.