Trade smarter with relational technical analysis by Benzinga

Benzinga – by Martha Stokes CMT, Benzinga Contributor.

Many traders search for the “holy grail” of picking winning stocks to trade – the magic indicator or the perfect candlestick pattern. Most are still looking after years of trying to learn how to trade and actually make real money in the stock market.

There is now a NEW approach to using and analyzing stocks that makes trading easier, providing higher profit and less risk with more control over all aspects of your trades.

Relational technical analysis takes the guesswork out of picking stocks to trade. This unique way of interpreting stock charts allows traders to enter a stock BEFORE the price moves in either direction.

A key element of the modern market that is rarely mentioned is the fact that the professional side trades by the millisecond. One millisecond means that 60,000 trades can be triggered before your order is completed. Retail brokers are only required to fill orders within 1 minute.

If it looks like your orders are filling in seconds, this is to make sure your order is on before it is filled. All computers monitoring the market can see your order. In fact, your broker’s computer watches how you enter your order and has the ability to keep track of your typical lot size and your typical entries.

Most traders make the common mistake of using retail news, retail commentary when the market opens, and live trading events to make trading decisions.

IF you use retail news to choose a stock to trade on a given day, when you can read or hear the news, open your broker account, choose the order type, choose the lot size and place your order, thousands of HFT and other orders on the professional site is already triggered well in advance of your order.

When professionals and HFTs trade a stock, their orders are typically filled within seconds of the market opening. They can decide when to start selling to retail buys, so most retail orders end up with a whipsaw action that causes a small loss that grows bigger as the trader waits, hopes and prays that the stock starts to run in the direction they hoped it would. Hope is not floating in the market. Hope sinks and losses mount. Trading losses mount and frustration erodes confidence.

Relational technical analysis uses the new Leading Hybrid Indicators that actually signal BEFORE price movements. A black candle may be the last candlestick on the chart, but the Leading Hybrid Indicator signals that the price will change and move up. This means that you buy with the professional traders who trade large lots, which are not always on the exchanges.

Relational technical analysis allows retailers to trade with the professionals and similarly with a professional. It takes the guesswork, confusion and frustration out of choosing stocks to trade and determining entry price, order type, stop loss, trailing profit stop, liquidity constraints and speed of execution risk factors.

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Professionals enjoy their jobs. They take pride in being able to hit the ear spread they have determined. Their routing is fully automated to ship their orders at a speed beyond the retail site’s reach. Professionals use several different kinds of mitigation tools, risk assessment tools, and lot sizes that are 10 times or more the size of the average retailer.

They also earn 90% of the time. This is the norm for professional traders. With these facts, you can begin to understand that you need to join the pros when, where and how they act, instead of constantly going up against them blindfolded.

Professionals are highly trained, extremely skilled traders who generate most of the momentum in stocks by using multiple types of controlled bracketed orders, special routing and know-how to push the HFTs, who are the fully automated Maker/Takers of the market.

High-frequency trading firms have been around for over 20 years and are authorized by the SEC to provide open-market liquidity to the exchanges, which the exchanges pay them to provide.

HFT orders fill the market queues before the market opens. This creates huge liquidity that leverages either to the upside or downside before the market opens. The automated Market Making computers identify which side of the order the huge anomaly of orders lies. If HFTs intend to jump a stock, the huge number of small lot orders requires Market Making Computers to lock up the stock to a price level where sell orders are at that time.

In the chart below, the sell orders forced a hole down at the open. Professionals were already positioned to take profit with Buy to Cover (BTC) orders on opening.

When the market opens, the HFTs cancel most of the orders and use the remaining orders to sell to the retail news traders’ buy orders. Thus, retailers get their orders filled in the market open or within minutes. These order executions make HFTs and other professionals huge profits and retailers huge losses.

By learning Relational Technical Analysis, one can learn to choose trades at the right time, trade with the professional traders and avoid the often large losses caused by following news and HFT activity.

Martha Stokes, CMT

Featured image sourced from Shutterstock

This post was written by an external contributor and does not represent the opinions of Benzinga and has not been edited for content. This contains sponsored content and is for informational purposes only and is not intended to be investment advice.

© 2023 Benzinga does not provide investment advice. All rights reserved.

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