In part one of this series, we will outline the methods we use to stay on the right side of price action.
Leaving your opinion at the door, as you start each new trading session, can save you from yourself. If we allow price action to dictate our decisions, it eliminates may of our problems. Think of it this way. What a buyer is willing to pay for an asset can tell a lot about their motives. To put it another way, what institutions are doing, can be interpreted in the data.
Renko Charts Focus on Price Action
Renko charts ignore time and focus solely on price changes that meet a minimum requirement, we use these price “bricks” to represent a fixed price move. If a stock or asset moves upward a fixed amount a white brick forms. If price “momentum” continues to meet these criteria and fixed price moves build additional white bricks, we can interpret this as a bullish trend.
The same goes for bearish price action. If a stock or asset moves downward a fixed amount, a red brick forms. If price “momentum” continues to meet these criteria and fixed price moves build additional bricks, we can interpret this as a bearish trend.
If we add an oscillator, like the Coppock Curve, we can then interpret this price action as a cycle or series of cycles. In the chart of SPY above, Coppock is beginning a new cycle.
Rather than opining that the markets are “too high” therefore it must sell off does nothing to interpret direction. Only data can answer your question; you just need to learn where to look.
In future parts, we cover other methods for interpreting price action and how this can lead to consistently finding “winning stock picks.” Until then, we’ll see you in the trading room.
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