Through the course of the last two weeks, we have been elaborately dealing with Stock Charts and the various intricacies associated with them.
It’s never too late to learn about these and however much you learn is never enough!
You may have all the skills and experience that you need to achieve success, but you can do little on ground if you don’t have the tools to support and exhibit your talent in the best possible manner.
Stock Market Signals (SMS) provides several expert tools for trading.
You can access information about the offered tools by visiting the following link: http://www.stockmarketsignals.com.
A better way to put it is that you hire a skilled painter to get your house painted who is known for his talent and experience in the field.
You give him a small paintbrush for painting the whole house.
What can you expect as a result?
Considering the fact that the painter is skilled and experienced, he will surely manage the painting job, but he will take a lot of time and waste a lost of energy in the task, reducing his overall productivity.
All of this time and energy wastage could have been saved had you given him the tools he need to do his job well and show his skills in their best capacity.
This is the best analogy for describing the importance of trading software to you.
You cannot expect to do your best if you don’t have the right software to support and assist you in your endeavors.
You surely can get and work your way around with basic software.
However, rest assured that basic software would only be able to do basic tasks for you.
Remember that you are trading against the best, fastest and smartest brains in the industry.
While you don’t have to be a genius to make money in the market, you surely have to do the essential and execute the plan as required.
With range bars, you have a massive advantage with you.
In fact, range bars are capable of telling you what standard charts are not even capable of capturing.
Therefore, you must complement your impeccable trading point with the right trading tools.
Good news for you is that most charting packages of today offer range bars.
With this said, time bars are capable of offering similar strategy benefits as range bars.
This chapter discusses the strategy that can be used for trading with time bars.
When looking for signals on the time charts, you can start with a period of 5 minutes to start with.
However, every market has its own conditions.
So, reviewing a 3-minute, 10-minutes or 15-minute chart will not be a bad proposition too.
Be sure to check and test if you are using the most appropriate range settings, which allow you to take advantage of the strongest trends that the market sees.
A significant advantage that range bars offer is that it is much easier to predict the opening of the next bar.
As one range bar closes, you know that the next bar will open the next time the range value of exceeded.
So, you can actually wait for the market to come to you and place orders accordingly.
This advantage is not available to you if you are working with time bars.
As one time bar closes, it is not possible to predict the opening, closing and values of the next time bar.
So, you need to wait for a signal after the time bar closes.
Once the time bar has closed, you can do one of the following:
Case 1: Assess the Bollinger bands and place entry orders at the same.
If the bar closes well within the Bollinger band and you know that you have received a valid signal, you can contemplate on placing an order of the value equal to the corresponding Bollinger band value.
For instance, if you notice a rising trend and the time bar closes, near the upper Bollinger band, then you must place buy stop order for a value corresponding to the Bollinger band value and wait until the order of triggered.
However, if you notice that the bar has closed, but your order has not been triggered but the signal is still valid, you may choose to adjust the order.
On the other hand, if the signal’s validity has expired, you will need to cancel the order and look for opportunities in the future.
The same principle holds true for the sell signal.
If you notice a falling Bollinger band with a valid sell signal, you must see if the band is closing above the Bollinger band.
If this is the case, a sell stop order must be placed for a value equal to the lower Bollinger band value.
Case 2: For entry, market orders are used.
If you see that the time bar is closing at or outside the lower or upper Bollinger band, you must act just in the same manner as you would act if this condition occurred with range bars.
Trading using market order is done such scenarios.
Another concept that you must introduced to, before we close this chapter is slippage.
Slippage is the difference between actual fill and expected entry.
Moreover, slippage occurs most commonly when you enter the market using market orders.
Actual fill price forms the basis of profit target and stop loss if the fill is worse than expected.
What is more important is that these values should not be based on entry price.
Therefore, we see how these two cases exponentially help you understand the use of Time Bars in charts.
Next week, we would be continuing our series of articles involving the Trading Strategies associated with the Stock market – a concept dealt at length in www.stockmarketsignals.com/blog but we’re constant learners so stay tuned and take in all that the stock market can throw your way!