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Hello everyone,

this newsletter may get a little technical for some but I will do my best to keep it simple as possible. Simplicity is a large component of what I think many traders need.

Speaking of technical interpretations, many analysts believe we have now reached a stage in the markets called stage 3, the stage where markets rally hard, when often the most money can be made (stressing the word can)  and stocks and other financial investments rise very quickly before then collapsing spectacularly.

So, it’s a strange time of combining aggressive risk taking with caution.

One of the technical methods I use to look for these extreme tops and bottoms is examining divergence between price and volume. In my weekly updates I do, (link below) I often speak about divergences and give examples.

https://www.easysharetradingsystems.com.au/how-to-trade/52-week-highs

As many traders age and have more years under their belt ( a belt covered in notches from kills and being killed) we tend to move away from many indicators and just analyse using price and volume. Readers will know I often say “price is the ultimate indicator”. Volume is its sidekick, riding shotgun.

So here is one doozy of an example (you may have to enlarge the chart - hit control +)

As mentioned every week on the chart I post, in the 52 week high page, I use those two indicators displayed . Rather than me waste your time here explaining them, it's best you just google and read up. The bottom line is that they can at times give you a glaring insight if the market is oversold or overbought. You can see clearly that during the Covid crash in 2020 the volumes were not duplicating the price action. What does that actually mean for us as investors and traders?

I often talk about probability. Many think indicators "tell" you what will happen, they don't. They give you an insight into what's probable. If price is falling yet the volume is not doing the same - as can be seen from the chart displayed, its probable that many are panicking and selling. However cool heads are prevailing. In hindsight it's easy to see that it was a panic and overreaction but in the moment we feel different. One of my tactics is to turn off the news and just read the charts. I will be keeping an eye on these indicators to gauge when and if the charts start to look irrational and overbought.

After finding divergences on weekly charts (which you should always look at first for most analysis) you can then shift to a daily chart and look for more timely entries or exits. In the next news letter I will give an example of that.

Speaking of riding shotgun, my trading teacher colleague Adrian Reid is running his Trader Acceleration week again, one of the subject in the course content is "Strategies that sync with your lifestyle and goals", a philosophy I agree with totally.

if you want to find out more here is the link

Https://go.enlightenedstocktrading.com/trader-acceleration-week-pc

That's all for this week

"Traders need to learn the skill of focusing the mind’s power
– to reason logically without the propensity to overthink –
so that events can unfold without interference"

The Zen Trader p.124

Buy the book (and other products) here

https://www.easysharetradingsystems.com.au/products-and-services/e-books/zen-trader

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