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It’s been a tough few weeks on the markets, with volatility abound and a number of influential factors taking place on a global basis. If the effect of further stimulus measures isn’t enough, we have a raft of data and earnings from major bellwethers both in the US and in Australia.
Taking this into account, when looking at potential trades in our recent Elliott Wave Webinars, a diligent, technical approach has been crucial. Those trades which proved successful during this difficult time, were performed using several forms of confirmation, one of which we will look at further in today’s newsletter.
When entering a trade, one looks for several forms of confirmation. This may be in the form of Elliott Wave, Oscillators, Bollinger Bands or any raft of technical indicators at a trader’s disposal. An indicator which is available to HubbInvestor software users is MACD. Moving averages provide an excellent gauge of timing.
Here’s a little background information on this widely used technical indicator:
MACD was created by a man named Gerald Appel and stands for Moving Average Convergence Divergence. In short, this is an indicator that follows the relationship between two exponential moving averages in price. A shorter period “signal line” is plotted on top of the MACD graph line, creating buy and sell signals in the form of a moving average crossover.
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In many instances, ProfitSource users will see a potential Elliott Wave Buy or sell signal, which has not yet been confirmed by an MACD crossover. This isn’t to say one should not take the trade, although if you wish to take a slightly more conservative approach, you may wait for a crossover before entering the trade. In many cases, the MACD will actually lag the movement in price, preventing traders from capturing the full range of profit. For this reason, many traders don’t wait for a MACD crossover before entering the trade. Provided you have completed a thorough analysis of the trade and the greater market, traders may have enough points of confirmation to pre-empt the trade. On the other hand, in many instances it is better to capture a portion of the move in price, rather than taking a risk that a confirmed trend may not be in place and a reversal may follow.
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Time to take a trade?
As attendees of the Elliott Wave Webinar will be aware, consistency is key. Successful traders would rather see a consistent number of small gains through trading, rather than a small number of large gains amongst a large amount of losses (and brokerage).
In times of global economic uncertainty and a sideways trending market, further confirmation of entry can make the difference between a successful portfolio and a great big hole in the wallet right before Christmas.
If you’re using HUBB Investor or ProfitSource and need to brush up on your analysis to boost trading profits, enrol in the Elliott Wave Webinar today.
Stay ahead of the game,
Lachlan McPherson
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