What timeframe works best for the EMA Cloud?

There is no universal best timeframe. Many traders use a higher timeframe for trend bias and a lower timeframe for entries.

Stock Chart Learning

Q: Is the EMA Cloud good for day trading?

It can be, especially in trending sessions. In choppy markets it may whipsaw, so many traders add confirmation or higher-timeframe filters.

Q: What are the best EMA Cloud settings?

Common settings include 5–12, 8–9, 20–22, and 34–50. The best settings depend on the market, timeframe, and volatility.

Q: Is the EMA Cloud the same as Ichimoku?

No. Ichimoku uses multiple components and different logic. EMA Cloud is simply two EMAs with shading between them.

TrendSpider Discount Code

2026-07-12T17:44:53.397-07:00

TrendSpider Coupon Code / Discount (Quick Answer)

The easiest way to get the best available TrendSpider discount is to use my link here: TrendSpider Discount Pricing (auto-applies best available offer).

I typically recommend the Enhanced plan if you want weekly 1-on-1 training.

Jump to: What TrendSpider is · Best features · Who it’s for · Use cases on this site · Video demo · FAQ

TrendSpider Coupon Code

TrendSpider is a ChartLearning-endorsed charting + backtesting platform. If you want the current best discounted price, use this link: TrendSpider Discount Pricing. The discount / promo will show on the pricing page when you click through.

My quick recommendation: If you’re serious about improving faster, the Enhanced plan is often worth it because it includes weekly 1-on-1 training sessions.

What TrendSpider Does (Best Features)

TrendSpider helps traders reduce manual chart work and test ideas faster. Here are the features that matter most:

Automated Technical Analysis: Automatically detects key chart levels and common technical structures so you spend less time drawing lines manually.
Dynamic Trendlines: Trendlines that adapt as market structure changes, which helps keep your analysis consistent across time.
Multi-Timeframe Analysis: Quickly align higher-timeframe structure with lower-timeframe entries (useful for swing traders and active traders).
Alerts & Notifications: Build alerts around price levels, trendline breaks, indicator conditions, and pattern events so you don’t have to stare at screens all day.
Strategy Backtesting: Test rules on historical data to see if a “great idea” actually holds up before risking real money.
Raindrop Charts: A chart style that blends price + volume behavior into a single view (useful for spotting momentum/rotation shifts).
Seasonality Tools: Check historical seasonal tendencies (best used as a supporting input—not a standalone strategy).
AI / Script Assist: Helpful for generating or iterating on scripts/rules faster (still needs human validation and testing).

Who TrendSpider Is Best For

TrendSpider tends to be a strong fit if you:

Want to scan and filter charts faster (less manual charting)
Prefer rule-based trading (entries/exits you can actually define and test)
Care about backtesting and avoiding “trust me bro” strategies
Want alerts to monitor setups while you work a normal life

If your goal is “buy random options and get rich,” no software helps with that. A tool only amplifies what you already do well.

TrendSpider Use Cases on This Site

Here are posts where I use TrendSpider concepts/tools:

EMA Cloud Indicator: The Next Generation Of Indicators?

How to Create A Winning Trading System

RainDrop Stock Charts - Taking Charting To The Next Level

Ready to sign up? Use this link for the best available discount at the time: TrendSpider Discount Pricing.

TrendSpider Video Demo

If you want a quick overview, here’s a demo:

Sign up using my TrendSpider discount link for the best available pricing, and consider the Enhanced plan if you want weekly 1-on-1 training sessions.

FAQ

Is there a TrendSpider coupon code?

The simplest way is to use the discount pricing page here: TrendSpider Discount Pricing. Any active promo / discount should show when you click through.

Is TrendSpider good for beginners?

Yes, as long as you focus on the basics: trend, levels, and one simple rule set. The danger is trying to use every feature at once. Start with: alerts + automated levels, then graduate into backtesting.

What’s the best feature if I only use one thing?

Backtesting (strategy tester). It forces reality. Most “strategies” fail instantly when tested.

Which plan should I pick?

If you want the fastest learning curve, I usually point people toward Enhanced because of the weekly 1-on-1 training. If you’re purely testing ideas solo, pick what fits your budget and upgrade later.

How To Create A Winning Trading System

2026-07-08T15:31:49.484-07:00

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How Do You Create a Winning Trading System? (Quick Answer)

A “winning” trading system is a repeatable set of entry + exit rules with risk management, validated by backtesting and kept honest with out-of-sample testing. The workflow is:

Define a simple rule set (entry, exit, risk)
Backtest on broad markets (SPY/QQQ) and multiple regimes
Evaluate stats (returns, drawdown, win rate, avg trade, exposure)
Iterate carefully (avoid overfitting)
Paper trade → small size → scale only after real results

Jump to: Why you need a system · Backtesting tools · Step-by-step tutorial · How to evaluate a backtest · How to improve the system · Common mistakes · FAQ · Conclusion

“If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.”

That quote maps perfectly to trading. Most traders don’t have a system—so they end up relying on: subscriptions, alert services, and social media “experts” (which is usually a fast track to losses).

A trading system doesn’t have to be perfect on day one. In fact, most systems start mediocre. The point is to build something you can measure, iterate, and improve over time. Once you have a real process, you stop guessing—and you stop outsourcing your decisions.

Related (important): Stop Trading Options

Backtesting Tools (What I Use)

To build a system, you need a backtester. This article uses TrendSpider’s strategy tester / backtesting tools (exclusive discount code).

If you’re serious about system-building, prioritize tools that let you:

Backtest rules across multiple symbols (SPY, QQQ, major stocks)
View trade-by-trade results + metrics (drawdown, exposure, avg trade)
Iterate quickly without “coding everything from scratch”

Step-by-Step: How to Backtest a Stock Trading System

Here’s the exact framework I recommend for building your first “real” system:

Pick a market + timeframe.
Start with daily candles for swing trading. (Day traders can test hourly/15-min later, but daily is easier to validate.)
Pick a baseline benchmark.
Your system must be compared to buy & hold on the same symbol. If you can’t beat buy & hold after realistic frictions, you need a reason to trade it.
Define entry + exit rules.
You need both. A strategy without a clean exit rule is not a system—it’s a hope.
Test across regimes.
Don’t only test bull markets. Your system should be survivable in chop and drawdowns.
Iterate one variable at a time.
If you change five things at once and results improve, you won’t know why.

Below is the TrendSpider layout used for this tutorial:

A Simple Starter System (5/10 EMA Crossover)

We’ll start with a basic momentum framework:

Buy when the 5 EMA crosses above the 10 EMA
Sell when the 5 EMA crosses below the 10 EMA

You can build and test this using the TrendSpider strategy tester (exclusive discount code).

Important: this is a “starter system” to demonstrate the process. Most simple crossovers do not beat buy & hold over long periods on major indices—testing will prove that quickly.

How to Evaluate a Backtest (What Actually Matters)

Don’t fall for a backtest that looks good but has hidden problems. These are the metrics you should care about:

Total return vs buy & hold (the baseline)
Max drawdown (how deep it can go underwater)
Exposure (how often you’re in the market)
Average trade and median trade (is edge consistent or one lucky period?)
Number of trades (more trades = more realistic sample size)
Whipsaw / chop sensitivity (crossovers often get destroyed here)

Also: always assume slippage and imperfect fills. If your average trade is tiny (e.g., <1%), real-world friction can erase it.

Example results screenshot:

Iterating: Improving the System With a Second Signal

One common improvement approach is using a cluster of signals (two independent reasons to enter). For example: keep the EMA crossover, but add a second entry based on volatility extremes.

Here’s a simple add-on: Bollinger Bands.

Entry #1: 5 EMA crosses above 10 EMA
Entry #2: price touches the lower Bollinger Band
Exit: 5 EMA crosses below 10 EMA (starter exit rule)

Bollinger Bands guide: What Are Bollinger Bands?

If your results get closer to buy & hold, you’re moving in the right direction. The point isn’t that this exact combo is “the answer”—it’s that iterative improvement is how edge is built.

Common Backtesting Mistakes (That Ruin Results)

These are the traps that cause “great” backtests to fail live:

Overfitting: adding rules until the past looks perfect (then the future collapses)
Testing only one symbol: your system might just be “optimized for that stock”
Ignoring drawdown: high returns are meaningless if you can’t survive the dips
Too few trades: a strategy with 12 trades in 10 years is not validated
No realism: slippage, spreads, and imperfect fills can erase small edges

FAQ

What symbols should I test first?

Start with SPY and QQQ (broad indices), then test major liquid stocks across different “personalities” (AAPL, AMZN, MSFT, TSLA, etc.). Your goal is to see if the idea survives different regimes—not just one lucky chart.

How much history should I use?

Longer is generally better as long as the data includes multiple environments (bull, bear, sideways). But also test more recent periods so you don’t build something that only worked in the past.

Can you beat buy & hold?

It’s hard. The easiest “win” is sometimes not higher returns, but lower drawdown with similar returns (better risk-adjusted performance). The market has a built-in upward drift—your system must earn its keep.

Conclusion

A trading system is how you stop guessing. Backtesting forces brutal honesty: either your rules produce an edge, or they don’t.

If you want to build a real system, your job is simple (not easy): test ideas, measure results, iterate slowly, avoid overfitting, and validate in real time with small size.

Next step: read How To Create A Trading Edge.

Backtesting tool used in this tutorial: TrendSpider (exclusive discount code).

How to Master Meme Stock Trading (Satire Guide)

2026-07-04T10:49:28.879-07:00

Master Meme Stock Trading (Satire): 9 Tips to Go Broke Faster

Disclosure: This post is a joke. It’s intentionally written like a meme-trader handbook. If you want serious education (systems, indicators, discipline), use the resources below.

Jump to: Monitor Setup · The 9 Meme Tips · Real Resources (Not a Joke)

If you’re here by accident and want real trading education:
• Common Mistakes Traders Make (examples)
• How to Create a Winning Trading System (Backtesting)
• How to Create a Trading Edge (Free)
• Stock Trading Scams & Ponzi Services (Social Media)
• Stop Trading Options (seriously)

Trading is a hard “career” that almost everyone will fail at. But after 1100+ trades, I evolved into a Jedi of meme stock trading—the sacred art of rockets, moons, and emotionally-charged entries.

My success can be described in one metric: number of monitors. Ideally you want a minimum matrix of 10×10 monitors. My personal setup is shown below.

The Correct Monitor Setup (Required for Profit)

Unfortunately, many cannot afford this setup. So I will provide an alternative: priceless meme trading tips that will help you accelerate your portfolio’s journey toward… character building.

9 Tips to Master Meme Stock Trading

Within days of absorbing these tips (via a 10-minute movie-like montage), you’ll master meme trading stocks like AMC, GameStop, and Carvana— making your portfolio sprint to $0 faster than ever before.

Watch CNBC and read viral finance headlines. When they panic, you know it’s time to really panic.
(If you want the opposite: Common mistakes traders make.)
Sing nice songs to your stocks so they feel supported. When you’re mad, don’t revenge trade—your stocks remember.
(Also: if you ever get the urge to short: Do not short stocks.)
Follow all the best “hindsight traders.” Their after-the-fact commentary will upgrade your trading IQ instantly.
Read everyone’s opinion on social media. The most popular opinion is always correct.
(If you want an actual edge: Create a trading edge.)
Only learn from 18–22-year-old hotshot traders selling courses. Especially those posting beach photos with quotes about freedom.
(If you want real structure: Build a trading game plan.)
Live, eat, and breathe WallStreetBets. Trade YOLO out-of-the-money options because sleep is for the weak.
(Real warnings: OTM options risk + Options pricing (gamma/delta) + Why options are bad.)
If you lose money, blame a non-existent hedge fund for “manipulation.” Bonus points for saying “naked shoring” and “ladder attacks.”
(If you want one real mechanic that gets confused for sorcery: What is a gamma squeeze?.)
Since blowing up accounts is part of meme trading, you need new funding sources. Find brokerages that offer “free” sign-up bonuses and speedrun adulthood.
(If you want to stop repeating this cycle: Trading discipline.)
Trade naked. Be one with the market. Feel the candles inside of you.
(Do not do this. Any of this.)

Want to graduate from meme trading? Start here:

Bollinger Bands (practical guide)
Japanese candlesticks (read charts better)
EMA explained + EMA Cloud
RSI explained + MACD explained
ADX trend strength + Stochastic oscillator

Real Resources (Not a Joke)

If you want the serious path:

Pick one upgrade: If you’re new, read Mistakes Traders Should Avoid. If you’re intermediate, build structure with Backtesting + a trading system.

Stop Trading Options! You Are Being Scammed!

2026-07-02T07:32:17.594-07:00

Stop Trading Options (Quick Summary)

Most retail traders lose money trading options. The leverage looks attractive, but time decay, volatility pricing, and liquidity mechanics are stacked against beginners.

Many “successful” options traders online make more money selling subscription services than trading.

What this article covers:

How options subscription services manipulate followers
Why leverage + time decay destroys small accounts
Why even good traders struggle with options precision
How front-running happens in trading groups
Where to focus instead if you want real consistency

Related reads: How Options Are Priced · Risks of OTM Options · Trading Scams Guide

Why Trading Options Is a Losing Game (Especially for Retail Traders)

Trading options is sold as the fast lane to wealth. Small account. Big leverage. Overnight wins.

Reality? Most retail traders lose money trading options.

I’m not writing this as a bitter trader. I’ve been a market-beating trader since 2012. I’m writing this because I almost blew up several times thinking options were the shortcut.

The Options Trading Service Scam

I believed the dream:

Start small → Use leverage → Get rich fast.

Social media was full of “options traders” posting massive gains. Conveniently, many were also selling subscription services.

I joined several.

What actually happened?

Erratic entries
Impossible fills
Victory screenshots no one could replicate
Excuses when trades failed

These “FURUs” often post trades after the move. They cherry-pick winners. They delete losses. And followers rarely question it.

Remember the ATLAS Trading Group indictment ? Pump-and-dump schemes disguised as education.

Why Options Are Structurally Difficult

Options are not just directional bets. You must be correct on:

Direction
Timing
Magnitude
Volatility

And you’re fighting:

Theta decay (time decay)
Spread costs
Implied volatility crush
Liquidity issues

The short-term market is largely random. Options require precision. Precision and randomness do not mix well.

If you want to understand pricing mechanics, read: How Options Are Priced (Gamma & Delta Explained)

Leverage Is a Double-Edged Sword

Leverage magnifies gains. It also magnifies mistakes.

One bad trade can wipe months of progress.

Weekly options? Even worse. Pure time decay machines.

I’ve written about the risks here: Why Options Are Dangerous

Front-Running & Liquidity Problems

Options markets are thinner than stock markets.

When a subscription service alerts thousands of members:

They buy first.
You buy after.
The price moves.

That movement benefits them — not you.

Even if unintentional, the structure works against followers.

If They Had an Edge… Why Sell It?

Think logically.

If someone truly had a consistent edge trading leveraged options:

They would compound rapidly.
They wouldn’t need $79/month subscriptions.
They wouldn’t need Discord communities.

Real edges compound. Fake edges sell access.

FAQ: Trading Options

Can you make money trading options?

Yes — some professionals can. But most retail traders do not outperform over time.

Is selling options safer?

Selling options changes the risk profile, but it still requires strong capital, discipline, and risk management.

What should beginners do instead?

Build a trading system first: How to Create a Trading System

Or focus on improving discipline: Stock Trading Discipline Guide

Conclusion

There is no shortcut to wealth.

Trading options — especially weekly contracts — is closer to gambling than investing for most retail traders.

If you see someone aggressively selling an options service: Run.

Remember:

Those who can’t trade, sell trading subscriptions.

Complete Anti-Options Education (Read These Next)

If you are serious about understanding why options trading destroys most retail traders, read these in order:

Why Options Are Dangerous – The structural flaws retail traders ignore.
How Options Are Priced (Gamma, Delta, Theta Explained) – Why time decay works against you.
The Ugly Truth About Out-of-the-Money Options – Why lottery-style trades fail.
Types of Stock Option Strategies – Why complexity doesn’t equal profitability.
Stock Trading Scams & Subscription Services Exposed – How social media traders deceive followers.
What Is a Gamma Squeeze? – Why meme-option traders get trapped.
Futures vs Options: Which Is Riskier?

If you want to build actual trading skill instead of gambling with leverage, start here:

How To Create A Real Trading System

Master Trading Discipline

What Is a Gamma Squeeze? How Options Hedging Drives Explosive Stock Moves

2026-06-29T19:22:13.054-07:00

Gamma Squeeze (Quick Explanation)

A gamma squeeze happens when heavy call option buying forces option sellers (often market makers) to buy shares to hedge. As the stock rises, the hedge requirement can increase quickly (gamma), which can create a feedback loop of more share buying → higher price → even more hedging.

Jump to: What it is · How it works · Strike crossing · Risks · FAQ · Related posts

The term "Gamma Squeeze" exploded into mainstream finance during meme-stock chaos (GameStop, AMC, etc.). People usually mention it to explain “why did this stock go vertical when nothing changed?”

Important: A gamma squeeze is options mechanics interacting with liquidity and positioning. It’s not magic — and it can reverse fast.

What Is a Gamma Squeeze?

A gamma squeeze is a rapid price move that can happen when:

Traders aggressively buy call options, often close to the current price.
Option sellers (often market makers) hedge by buying the underlying shares.
As the price rises, the hedge requirement can increase quickly due to gamma.

The key idea is that hedging flows can become a self-reinforcing loop.

How It Works (Step-by-Step)

Here’s the simplified mechanics:

Call buying spikes: traders buy lots of calls (often short-dated).
Market makers hedge: to reduce risk, they buy shares.
Delta rises with price: as the stock rises, calls become more sensitive to price (delta increases).
Gamma accelerates hedging: delta changes faster near key strikes → MMs may need to buy more shares quickly.
Feedback loop: buying pushes price up → price up increases hedging → hedging pushes price up.

Plain-English version: call buying can “pull” share buying behind it, because option sellers try not to get wrecked.

Why “Crossing Strikes” Can Matter

Gamma effects often get more intense around big, obvious strike prices (like 50, 100, 150) when open interest is high. When price approaches/crosses these strikes, hedging needs can change quickly — especially into expiration.

Reality Check: Gamma Squeezes Cut Both Ways

Even when the squeeze story is “true,” squeezes are fragile because the same mechanics can reverse:

If call buying slows, hedging demand can fade.
As options expire, the hedging flows can drop off suddenly.
When price falls, deltas fall — which can trigger selling from hedgers.

That’s why meme-stock moves often look like a rocket up… and an elevator down.

FAQ

Is a gamma squeeze the same as a short squeeze?

Not exactly. A short squeeze is driven by short sellers buying shares to cover. A gamma squeeze is driven by options hedging (often market makers buying shares). They can happen together — and that’s when things get extra violent.

Why do market makers buy shares when calls are bought?

Because if they sold calls, they’re exposed if price rises. Buying shares helps neutralize that exposure. The amount they buy depends on delta — and how fast delta changes depends on gamma.

Can gamma squeezes happen on any stock?

They’re more likely when options volume is heavy, liquidity is thin, and open interest clusters around key strikes.

Conclusion

A gamma squeeze is basically options flow + hedging mechanics creating a feedback loop. GameStop is the poster child because call buying + positioning + hype created repeated episodes of “forced” share demand. Just remember: when the flows stop, the squeeze can stop too.

How To Exploit Chart Patterns to Make Money

2026-06-24T11:04:47.669-07:00

Chart patterns can provide a rare clarity signal in the daily noise of market price action. And no matter what security or asset class you’re trading, chart patterns can help you make sense of the numbers and interpret random information into actionable insights. In my experience, this is especially true for trend followers and other traders with price action at the heart of their trading strategy.

I wanted to write this short article to share exactly how I use different reversal and continuation chart patterns to orient myself in any market environment. So by the time you’re done reading, hopefully, you’ll have a much deeper understanding of how chart patterns can be one more valuable resource in your technical analysis toolbox. So where do we start?

How Chart Patterns Help Trade:

As a trend-following trader, my main trading and investing strategy is to buy stocks going up in price and try to hold on for the ride. This momentum-driven approach works well in bull markets and keeps me out of trouble during flat or bear markets.

But the problem with this approach is it can be hard to know when a trend is too extended or might have further to run. And that’s exactly where chart patterns can help shine a light! Let me show you what I mean.

Using Stock Chart Patterns:

For starters, chart patterns can really help you manage your expectations. As you probably know, in trading, staying grounded in reality is key to a consistent P&L. So when you see a stock hit a new high, only to fall back into a long, sideways consolidation pattern, you can accept this pattern and adjust your expectations to the reality that you may not see capital gains right away. You might even decide to sell your stock and move on, depending on your timeframe.

On the contrary, though, chart patterns can also help alert you to high probabilities of continued follow-through. So, for example, I often scan for stocks hitting new 52-week highs. But it can sometimes be scary to buy these stocks when they appear they’ve gone up too far, too fast. However, if there is a clear chart pattern in recent history, I often feel more confident taking a swing.

For instance, I’m much more comfortable buying a technical breakout in an uptrend if it has also recently broken out of a multi-week ascending triangle pattern because the projected measured move provides some forward-looking reassurance that this stock might have more gas in the tank.

Reversal Chart Patterns

The contextual information chart patterns provide is especially true with reversal patterns. When combined with the signs of a new uptrend, a clearly identifiable multi-week or multi-month reversal pattern (like a big double-bottom or head-and-shoulders top) can give me the conviction to bet big on an entry signal. In fact, some of my biggest wins over the last couple of years have benefited directly from incorporating reversal chart patterns like this.

Bottom line? By adding chart pattern analysis to your existing trading or investing toolset, you can get an important context to help you manage your expectations for a given trade (both to the upside and the downside!)

For me, by focusing on longer-term chart patterns, I can better manage my mental and emotional expectations of a given trade. And I can adapt my trend-following trading strategy to bet bigger or smaller depending on confirmation from reversal or continuation patterns on the charts.

So that’s why chart pattern trading has been a big win for me personally, and I suspect if you can add it to your decision-making tools, you’ll be better off too!

Using ChatGPT For Stock Trading: Ten Prompts for Traders

2026-06-20T20:16:27.659-07:00

AI has surprised the world, revolutionizing numerous industries with its capabilities. For those who understand how to harness its power, there's a significant potential to make a lot of money. AI bots such as ChatGPT can offer traders and investors a way to gain insights, compile data, and make informed decisions regarding stock trading and investing.

So, what exactly are "prompts"? In AI, a prompt is a specific instruction or question you pose to the AI. The AI then interprets this prompt and generates a response based on its training and knowledge. These prompts can range from simple queries to more complex requests for analysis or suggestions.

In this article, we delve into the realm of stock trading, providing a few starter or beginner trader prompts. These are designed to help you begin leveraging AI for trading. Remember, the prompts we provide here are just a starting point. As you grow more familiar with AI tools and they evolve, it is a must to iterate on these prompts, refining and customizing them to better suit your trading strategies and needs. Here are five prompts to help you get into the world of AI when it comes to the Stock Market

How to Use Artificial Intelligence For Stock Trading

In the list below, I will be providing basic AI prompts that are to be used on an AI Chatbot. The most popular one right now is ChatGPT. As you continually use these prompts, you will gain experience and insight into improving the prompts to your desired needs. So keep that in mind, that these are starting points to get started. It's important to think outside the box when using AI to trade. There are many ways to do it, and some are better than others!

Market Analysis

1. Market Analysis and Insights: "Provide a detailed analysis of the current trends in the tech stock sector, including key players and recent market movements."

This prompt helps traders comprehensively understand the tech sector, crucial for identifying investment opportunities and understanding market dynamics.

2. Sector Performance Comparison: "Evaluate the performance of renewable energy stocks compared to traditional energy stocks over the last year, considering market trends and future outlook."

Useful for comparing sectors and understanding which might offer better investment prospects, especially in light of evolving market and environmental trends.

Historical Insights and Risk Management

3. Historical Performance Review: "Can you compare the historical performance of stocks X and Y over the past five years and highlight major growth or decline phases?"

This prompt aids in making informed decisions by revealing the growth trajectory and stability of specific stocks based on their historical data.

4. Risk Assessment: "Analyze the risk factors associated with investing in emerging markets stocks in the current economic climate."

Crucial for investors looking to diversify into emerging markets, offering insights into potential risks and rewards in these markets.

Strategy and Decision Making

5. Investment Strategy Formulation: "Suggest a diversified investment strategy for a portfolio focused on long-term growth with moderate risk."

This prompt guides the creation of a balanced portfolio, suitable for those seeking stable, long-term growth with managed risk levels.

6. Global Economic Impact Assessment: "Assess the impact of current global economic events, such as trade agreements or international conflicts, on the financial and banking sectors."

Helps traders understand the global economic landscape's effects on specific sectors, essential for well-rounded investment decision-making.

7. Trend Analysis: "Identify and explain the top three trending investment themes or sectors in the current quarter, including reasons for their popularity and potential sustainability."

Enables traders to stay ahead by identifying and understanding the market's emerging trends, crucial for both short-term and long-term strategies.

Technical Analysis and Earnings

8. Technical Indicator Insights: "Explain how the moving average convergence divergence (MACD) and relative strength index (RSI) indicators are currently signaling for Stock Z."

Provides interpretations of technical indicators, helping traders make informed short-term trading decisions based on market momentum and trends.

9. Earnings Analysis: "Analyze the quarterly earnings reports of Company A and B, highlighting key financial metrics and their implications for future stock performance."

Valuable for understanding the financial health and growth potential of companies, guiding investment decisions based on fundamental analysis.

Current Events and Market Impact

10. News and Event Analysis: "Summarize the potential impact of the recent Federal Reserve's interest rate decision on the stock market."

Essential for staying updated with major economic decisions and understanding their broader impact on the stock market, aiding in strategic adjustments.

Conclusion

In utilizing these prompts, it's important to remember that AI bot responses should be used as a starting point for further research and analysis. Although AI bots have huge potential to provide valuable insights and data aggregation, it's not a substitute for professional financial advice. Always cross-verify information and consider consulting with a financial advisor for investment decisions (I know almost no one will, though).

If you enjoyed this article and are a beginner, feel free to read my beginner's guide to trading. For those who want more and are a bit more advanced, take a look at my step-by-step guide on how to create a winning trading system. Also, for those looking for AI trading tools, take a look at TrendSpider charting service, and use the link for 40% off.

Understanding Market Indicators

2026-06-14T08:38:39.283-07:00

Market indicators are the guiding tools an investor needs to make decisions. They describe the conditions of the economic environment, helping investors capture the trends in the market and alter their strategies concerning these trends. Interpreting such indicators helps investors overcome the complicated nature of the financial markets.

Economic Data Role in Financial Markets

Economic data is crucial in financial markets, for it reflects the health and direction of an economy. This will include indicators of the GDP, inflation rates, and employment figures. All these set the scene for investor sentiment and market performance. If correct, its interpretation may strategize one's investment decisions.

This article focuses on the importance of market indicators and how to use them to derive an informed investment decision. It covers the different types of market indicators, key economic data to watch, and how to integrate those indicators into the investment strategy.
What Are Market Indicators?

Market indicators are quantitative values that describe financial markets' performance and direction. They encompass various metrics that reflect economic activity and investor sentiment and give a full view of market conditions.

Types of Market Indicators

Leading Indicators:

These predict future economic activity, including metrics like stock market returns and new business formations.

Lagging Indicators:

These confirm trends, such as unemployment rates and corporate profits, after they have begun.

Coincident Indicators:

These go together with economic changes, including GDP and retail sales.

Market indicators capture the underlying trends in the economy, leading to a possible change within the concerned market, thus influencing investment decisions. Investors use these indicators to forecast any probable change in market conditions, which helps them adjust their respective portfolios accordingly.

Key Economic Data to Watch

Gross Domestic Product (GDP)

Understanding GDP and Its Impact on Markets:

GDP measures the total economic output of a country, and it is an indicator of a country's financial health. On the rise, it indicates economic growth. Hence, it may push up corporate profits and stock prices.

How to Interpret GDP Reports:

Professional and individual investors will try to analyze the GDP report for trends in the economy and make reasonably correct predictions about the future of the markets.

Inflation Rates

Consumer Price Index (CPI) and Producer Price Index (PPI):

These indices estimate inflation by following the price change in goods and services. Then, when inflation rises and reduces purchasing power, this might impact interest rates and, hence, the bond and stock markets.

The Role of Inflation in Shaping Market Expectations:

Inflation affects the policies of central banks, which tend to impact investment returns through changes in interest rates.

Employment Data

Unemployment Rate and Non-Farm Payrolls (NFP):

Employment data reflects the economic health and labor market conditions. High employment levels typically indicate economic strength, supporting higher consumer spending and business investment.

How Employment Data Reflects Economic Health:

Investors use employment data to assess economic stability and predict market trends.

Interest Rates

Central Bank Rates and Their Influence on Markets:

Central banks adjust interest rates to control inflation and stimulate economic growth. Changes in rates can impact borrowing costs and investment returns.

Yield Curves and What They Indicate:

The yield curve reflects investor expectations about future interest rates and economic activity. An inverted yield curve may signal an impending recession.

Consumer Confidence Index (CCI)

Measuring Consumer Sentiment:

The CCI gauges consumer optimism about the economy, influencing spending and investment decisions.

The Relationship Between Consumer Confidence and Market Performance:

High consumer confidence often correlates with increased spending and economic growth, boosting market performance.

Trade Balance and International Trade Data

Understanding Trade Deficits and Surpluses:

Trade data reflects a country's economic relationships with the rest of the world. Trade deficits can weaken a currency, affecting export competitiveness and market dynamics.

How Trade Data Affects Currency and Stock Markets:

Trade balances influence currency values and investor sentiment, impacting stock market performance.

How To Use Market Indicators To Trade

How to Identify Market Cycles:

Investors analyze market indicators to identify economic cycles and adjust their strategies accordingly.

Recognizing Patterns and Predicting Market Movements:

By recognizing patterns in market indicators, investors can make more accurate predictions about future market movements. Combining Multiple Indicators for Comprehensive Analysis

Cross-Referencing Data for More Accurate Predictions:

Investors enhance their analysis by combining multiple indicators, providing a more holistic view of market conditions.

Building a Holistic Investment Strategy:

A comprehensive strategy considers various indicators to optimize investment decisions.

Examples Using Market Indicators To Trade

Historical Examples:

Examining past investment decisions informed by market indicators can provide valuable insights and lessons for current strategies.

Lessons Learned and Best Practices:

Successful case studies highlight the importance of accurate data interpretation and strategic planning.

Advanced Techniques for Trading Market Indicators

Technical Analysis and Market Indicators

Using Charts and Graphs to Visualize Data:

Technical analysis involves visualizing market data to identify trends and potential trading opportunities.

Key Technical Indicators to Supplement Economic Data:

Indicators like moving averages and RSI provide additional insights into market trends.

Fundamental Analysis and Market Indicators

Evaluating a Company’s Health Using Economic Data:

Fundamental analysis uses economic indicators to assess a company's financial health and growth potential.

Long-Term Investment Decisions Based on Fundamentals:

Investors use fundamental analysis to make informed long-term investment decisions.

Sentiment Analysis and Market Indicators

Gauging Market Sentiment through Economic Reports:

Sentiment analysis evaluates investor attitudes and expectations, influencing market movements.

How Investor Psychology Influences Market Reactions:

Understanding investor psychology helps predict market reactions to economic data.

Mistakes Traders Make Using Market Indicators

Overreliance on Single Indicators

Why It's Important to Look at the Bigger Picture:

Relying solely on one indicator can lead to inaccurate predictions and investment decisions.

Misreading Data Due to Short-Term Fluctuations: Short-term market fluctuations can distort data interpretation, leading to misguided decisions.

Ignoring Global Economic Context

How International Events Can Influence Local Markets:

Global events can have significant impacts on local markets, affecting investment strategies.

Confirmation Bias in Interpreting Market Data:

Personal biases can skew data interpretation, leading to suboptimal investment choices.

Steps on How To Use Market Indicators To Trade

Building an Economic Data Calendar

Keeping Track of Key Economic Releases:

An economic data calendar helps investors stay informed about important data releases.

How to Prepare for Major Market-Moving Events:

Preparation involves analyzing the potential impacts of upcoming data releases on market conditions.

Developing a Personal Investment Strategy

Tailoring Your Approach Based on Risk Tolerance and Goals:

Investors should align their strategies with their risk tolerance and financial goals.

The Role of Diversification in Mitigating Risk:

Diversification helps mitigate risk by spreading investments across different asset classes.

Tools for Analyzing Market Indicators

Online Platforms and Software:

Various tools and platforms provide access to market data and analysis resources.

Financial News and Economic Reports:

Staying informed through reliable news sources and reports enhances investment decision-making.

Frequently Asked Questions (FAQs)

What Are the Most Important Market Indicators to Watch?

Key market indicators include Gross Domestic Product (GDP), inflation rates, employment data, and interest rates. These indicators provide insights into the overall economic health and can influence market trends and investor sentiment. Monitoring these indicators helps investors make informed decisions by understanding the economic environment and potential market movements.

How Often Should Investors Review Market Indicators?

Investors should regularly review market indicators to stay informed about current economic conditions and adjust their investment strategies accordingly. Frequent reviews allow investors to respond to changes in the market environment and capitalize on emerging opportunities. By staying updated, investors can better manage risks and optimize their portfolios for long-term success.

Can Market Indicators Predict Market Crashes?

While market indicators can provide valuable insights into economic trends, they cannot predict market crashes with certainty. Crashes are often triggered by factors, including economic downturns, geopolitical events, and investor sentiment. Therefore, diversification and risk management are essential strategies to mitigate potential losses during market downturns.

What tools can help analyze market indicators?

Various tools can assist in analyzing market indicators, including platforms like Strike Money. These tools provide access to comprehensive economic data and analytics, enabling investors to perform detailed market analysis. Utilizing such resources can enhance investors' ability to interpret market trends and make informed investment decisions.

How Do Global Events Affect Market Indicators?

Global events can significantly influence market indicators by impacting economic conditions and investor sentiment. Events such as geopolitical tensions, natural disasters, and major policy shifts can lead to market volatility and changes in economic forecasts. Understanding the interconnectedness of global markets helps investors anticipate potential impacts on local markets and adjust their strategies accordingly.

Mistakes Traders Should Avoid At All Costs

2026-06-10T13:32:04.759-07:00

I'm a winning trader who has crushed the market since 2013, specializing in swing trading. I am mostly in cash and profit from extremely oversold/overbought trading stocks for quick gains. I have compiled a list of common mistakes traders make. Using this list has helped me become profitable and have a trading system with over a 95% win rate. Please add it to your trading regimen.

List of Mistakes Traders Make

Don't trade stock on the OTC. This is the wild wild west here; most of these companies are entangled in fraud (very little regulation on the OTC Exchange).
Don't trade foreign stocks, especially Chinese. A lot of fake accounting and government intervention.
Don't trade commodities (Oil and Gold). They follow geopolitical events that are simply unpredictable.
Don't trade companies that profit from commodities (see #3).
Don't trade forex and futures. Completely different beast, a lot of it requires leverage and is prone to manipulation on light volume.
Don't listen to TV pundits. They know less than you do :-).
Don't trade options. They are very complicated instruments rigged against you, like Casinos.
Don't subscribe to real-time subscription trading services. A lot of them are scams.
Don't listen to WallStreetBets (WSB) on Reddit. For every millionaire you see, thousands lose money.
Don't short stocks. The market is designed to always go up due to the Fed's help. If you do use puts, that way you don't expose yourself to unlimited losses (Imagine Shorting GameStop $GME at $10)
Don't trade healthcare stocks, as Congress has a huge say on how these will trade. One new law and the stock you are trading could have their profits wiped out!
Avoid stocks that end with "Holdings." Their finances are pretty complicated, and reporting is hard to follow. They often have their revenue and assets in a plethora of places. Just stay away.
Invest in companies that have great growth, but do not hold any sort of proprietary IP. What ends up happening is companies like Amazon, Google, and Apple will take hold of how much growth opportunity the company has and then just end up copying them. One example is how Amazon is attempting to enter the telehealth space, aiming to capture market share from companies like Hims.

Conclusion

The list above highlights several common mistakes that traders make. It advises against trading on the OTC due to potential fraud, avoiding foreign stocks with fake accounting and government intervention, and steering clear of commodities, forex, futures, and options trading due to their complexity and manipulation risks. It cautions against relying on TV pundits, real-time subscription trading services, and following WallStreetBets on Reddit.

Shorting stocks is discouraged, with a focus on the potential for unlimited losses. Healthcare stocks are deemed risky due to congressional influence. Additionally, stocks ending with "Holdings" are recommended to be avoided due to their complex finances.

Hopefully, following this list to a T will help you become a more profitable trader and reduce the frustration that goes with stock trading. Feel free to read a few of my other lists, including Ten Signs You Are Probably A Terrible Trader and How To Master Meme Stock Trading.

Also, I would like to see how well I have done in trading over the last decade, head over to breaking down my 95% Win Rate Trading System.

Why Fundamental Analysis Matters For Stock Trading

2026-06-07T15:47:32.631-07:00

This site heavily focuses on technical analysis, but through experience, I learned that a company's fundamentals must be understood to properly assess risk. The stronger the company is fundamentally, the less risk there is when holding. Keep in mind the best trader out there, Warren Buffett, is famous for value investing, so it's always good to have a solid understanding of this strategy, even if you will only be using it a little going forward.

This article will cover five fundamental financial metrics before trading and investing in a stock. As fundamentals do matter (unless day trading), even if your trading strategy heavily focuses on Technical Analysis. I can't emphasize this enough; you need to understand what you are investing in. Investing in the hype with no fundamentals to back the stock up will humble you in the Market.

Always be asking, do the fundamentals support the hype? What happens if the company enters a rough patch in the next few months/years? Do they have enough cash, or will they have to go bankrupt, thus wiping their stock to $0? These are the questions you need to have answered. For example, the fundamentals are never there when trading small-cap oil stocks. A sharp drop in oil prices usually causes these companies to go bankrupt.

Fundamental Analysis

For analyzing the fundamentals of a stock, let's use Tesla ($TSLA) as an example, where the CEO, Elon Musk is always in the news for various reasons. Tesla has been making all the right noises lately and just continues to defy everyone's expectations as it powers to never-ending all-time highs. Many people think the stock is overvalued, but what is the basis for this claim? Hopefully, the basic metrics covered will give you a starting point to answer whether Tesla's market cap is justified.

The following are five value investing metrics. They are easily found when looking up stock quotes in your favorite broker or app, as well as covered in quarterly reports by every publicly traded company.

Earnings Growth: Tesla's year-on-year revenue improvement reported for the third quarter is 39.16%, marginally lower than its recent surge of a staggering 193%. However, Tesla Inc. stands 2nd in the Auto and truck manufacturing industry when it comes to revenue growth. Always remember that the fluctuation in revenue growth for a stock doesn't need to be huge, but should be consistent.

Plowback Ratio and Reserves: Dividends and plowbacks are a part of the company's net profit. These are obtained after deducting all expenses of a company, including all applicable taxes. A dividend is what the company gives to its shareholders. Plowback is that part of the company's net profit that the company adds to its existing reserves, which are further used for the growth/expansion of the company. Strong reserves indicate strong fundamentals and growth.
Debt-to-Equity Ratio: The latest report for Tesla Inc. indicates this ratio at 1.80. It is obtained by dividing the total debt of the company by shareholders' equity. The biggest companies have liabilities and debts on their balance sheets. Ideally, companies with lower debt-to-equity ratios are considered to be the best bet, but it depends on the magnitude of the industry, too.

Price-to-Earnings Ratio: The trailing twelve-month P/E of Tesla stands at 129.12X. This is not at par with the Automotive - Domestic Industry's P/E, which stands at 15.71X. The P/E ratio is one of the major indicators of how a stock is performing and how much a shareholder is earning. For example, if a stock has a P/E ratio of 25, it indicates that the stock is trading at 25 times its TTE (trailing twelve months' earnings). The lower the number, the better it is considered to be. In my opinion, the P/E ratio is outdated and really doesn't apply to the most popular growth stocks today.

Dividend: Tesla doesn't pay a dividend to its shareholders. However, the stock's share price has returned over 850% within the last few years, despite being negative in 2021. If a company pays dividends consistently, it shows that it is stable and deep-rooted. A higher dividend may often be an indicator of instability within the company. Also, it shows that the company has no growth plans. So you may get worse returns with stocks that pay "good" dividends (basically those that pay higher than a savings rate).

Bonus Tip: Never trust reports that come out of China or any other company outside of the United States, as the majority of the time, the accounting and reporting are greatly exaggerated to the point that it is often fraud!

Conclusion

Hopefully, this article gives you a nudge into thinking about fundamentals, even if you are purely a technical trader. You always need to think outside the box and consider every edge you can get, and also protect yourself from the worst-case scenario when you decide to hold a stock overnight. Because worst-case scenarios unfortunately happen way more than you think!

For more into understanding Fundamental Analysis, I suggest checking out Fundamental Analysis: A Beginner’s Guide.

Ten Signs You Are Probably A Terrible Trader

2026-06-02T09:12:57.428-07:00

Warning: The following article is beyond harsh and contains information no seasoned trader will tell you. Before reading further, I have been trading since 2011, when I was still in college. I have over 1,100 trades and have beaten the market (S&P 500) since 2013. I have also earned well over six figures in profits. So, the information below comes from experience and honesty. Take what you will from it.

Over 90% of traders will lose money in the stock market. If you are reading this, you are a loser in the Market. To encourage you to quit before you lose all your money, I created a list below to make you realize you are terrible at trading and should find another dream to pursue.

1 - You follow "professional" traders on Twitter. The truth is, many on Twitter are complete phonies and have built a fake trading persona to end up selling you something in the end. More on this can be found in my guide on identifying fraud traders.

2 - You look at inspirational quotes or quotes from "famous" traders as part of your trading regimen. This is nonsense; this won't help you.

3 - You assume psychology is a major part of trading, much more than an actual system. As such, you constantly remind yourself that you lost money in your last trade because of psychological mistakes, and thus, you refer to #2 on the list to regain focus (useless trading quotes). If psychology were such a big part, the simple solution would be to write programs that would trade for you (this isn't a moneymaker). Many "professional" traders instill that psychology is big enough to sell you their products to improve your "weak" psychology. To be clear, I am sure most of you lack discipline, but even with discipline, you still would lose money.

4 - You watch CNBC or look at mainstream media for advice on trading the Market. News flash, journalists, and people who write articles are unlikely to understand the exceedingly complex and random forces that are the Market. Always ignore the headlines when trying to justify market movements.
5 - You think the more time you put into the Market will directly result in actual profits. No, this is not true. Again, this is false information given by "professional" traders to up their winning persona so that in the end they can sell you something. If indeed one has developed a winning system, it does not require hours of looking at charts on Friday night while your wife gets dressed up before you guys go out. It's done with programs and scripts scanning the markets, which take seconds a day (after the initial work done to develop a winning edge..this will likely never happen).

6 - You buy a lot of trading books and software. The information from trading books or software may have been profitable. However, once that information is public and its knowledge is known by many, it will likely yield an edge in the Markets. Hence, a reminder that if you have something truly profitable, you should keep it a secret.

7—You subscribe to a trading service. By 2024, you should have learned that all these services are bogus scams. The article linked provides a plethora of information to understand why I claim that stock trading services are bad.

8 - You trade options. Options are gambling. It always gives the person who sells the options a massive edge. Let's hope you have yet to be inspired by WallStreetBets on Reddit to go all-in with out-of-the-money options, YOLOing your life away.

9 - You hindsight trade. If you do this, you have no business even owning a stock trading account. Should of, could of, and would of is not a winning strategy! It's a strategy for the fastest way you can lose your house to the bank!

10 - Finally, your account continually goes to $0. Take a hint. Quit.

How many of the ten listed above are you guilty of?

For those who want to stop losing, look at our article on creating a trading edge based on your current system. It's an in-depth guide I have yet to see anywhere else online.

Also, I wrote an in-depth article on how to create a winning trading system. These two articles will take your trading to a level you have never imagined, as long as you put in the work!

Options Vs Futures: Should You Be Trading Futures?

2026-05-30T09:04:03.560-07:00

In the financial markets, traders and investors often debate the merits and risks of different securities. Two of the most commonly compared are Futures and Options. Understanding the differences between these two can help traders decide which suits their trading style and risk tolerance.

In short, Options contracts allow traders to trade but not the obligation. In essence, investors can buy or sell Options shares at certain prices at any time if the contract is in effect. On the contrary, Futures trading requires a seller to sell shares and buyers to buy them on a specific date unless the holder closes their position before it expires. Therefore, the transaction is solid and must proceed, as futures often involve physical commodities (such as corn, gold, and oil). There is no backing out when it comes to Futures; the transaction must go through at the expiration date. This is partly why oil prices went negative during the COVID-19 pandemic.

While both futures and options are financial products that make money, their markets are widely different and pose considerable risks. This article considers the differences between these two financial products to help you make a better-informed trading decision as an individual investor.

Futures: Defined and Demystified

Futures contracts are standardized agreements to buy or sell an asset at a predetermined price at a specified time. These contracts are legally binding and typically involve commodities, such as agricultural products, energy resources, and metals. However, Futures are also prevalent, including those based on market indices.

Futures contracts are time-oriented. They expire, forcing you to make certain decisions, such as selling the contract to take your profits or losses, staying out of the market, or taking the delivery of the equity, product, or commodity the contract represents.

Most Futures contracts can be traded from Sundays, 6 PM (EST) to Fridays, between 4:30 PM and 5 PM (EST) – depending on the commodity. Technically, trading stops for thirty to sixty minutes daily. So, essentially, Futures are traded 24 hours, which can add to individual investors' stress and workload. Where your sleep may be severely hindered.

What Are the Risks of Trading Futures?

Simply put, Futures contracts can lead you to huge debts. While other traditional financial products, such as bonds and stocks, are associated with high-end risks, Futures undoubtedly generate high yields but even higher possibilities of extremely severe losses. Futures allow for significant leverage, meaning that a small margin deposit controls a large amount of the underlying asset.

Futures expose investors to maximum risk, potentially losing all their money within the twinkle of an eye. You have to put some money down when buying a Futures contract, and your rewards and costs aren’t established until such a contract expires. It is not until then that both involved parties discover their outcomes. What does this imply? You have “almost zero” control over your risk profile.

Futures prices are accounted for daily, meaning a certain amount of money is transferred between the seller and buyer at the end of the day. If the prices are unexpectedly volatile, you may be required to add additional funds at the end of each trading day, so you don't get margin-called. So, you will either have a massive account or be heavily leveraged.

Lastly, the Futures market is traded on a relatively thin volume, as not many people can afford to trade it. As a result, it is heavily prone to manipulation by hedge funds and other trading entities. You will often see a huge crash or weird price action, wondering what just happened, only to find out a month later it was manipulated by a firm under investigation. This really makes it difficult for the individual investor to be successful.

These three issues listed above make trading Futures extremely dangerous for retail investors. If you don’t have just enough assets to cover your losses, you can end up losing both your trading portfolio and personal finances.

Understanding The Basics Of Options

Options, like Futures, are also risky. The Options contract is based on the value of underlying assets, like stocks. As mentioned earlier, an Options contract offers the opportunity to buy and sell assets at a certain price, but not the obligation. In essence, you don’t have to buy or sell an asset if you don’t want to. As a derivative investment form, even when you buy or sell shares, it doesn’t represent the actual ownership of the underlying investment until you finalize the agreement.

Is Options Trading Risky?

The technicalities associated with Option trading risks are that it is relative. This means that not all Options contracts have the same risk. As a buyer – otherwise called a holder – you have a different risk than if you are the seller – otherwise called the writer.

You can continue reading more about Options contracts and the associated risks.

The Bottom Line – Futures or Options?

Both Futures and Options offer unique opportunities and risks for traders. Futures contracts may be suitable for those looking for a straightforward, high-leverage way to trade commodities and financial instruments. Options, with their ability to structure varying degrees of risk and potential return, can be attractive to traders with a more nuanced market outlook or those with a lower risk appetite.

However, with one wrong move when trading Futures contracts, your account may be wiped out, and maybe even plunge into enormous debts for your entire life. Technically, it’s not worth the risk.

Ideally, you should stay away from both!

The MACD: The Perfect All In One Indicator?

2026-05-28T11:00:35.488-07:00

Expert traders quickly tell you that combining two indicators will inevitably give you better and more reliable signals on when to enter or exit an open position. Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship in the movement of the price of a security. It combines two indicators: a 12-day exponential moving average for the short-term changes and a 26-day exponential moving average for the long-term changes.

Gerald Appel invented the MACD in the 1970s. He intended to create an indicator to reveal a stock's trend direction, momentum, strength, and length. This makes it unique from other indicators, as it's an "all-in-one" indicator.

The MACD Formula

MACD is calculated by taking the 26-period exponential moving average (EMA) and then subtracting the 12-period EMA. This gives the MACD a 9-day EMA, the signal line.

When the 12-period EMA exceeds the 26-period EMA, the MACD will be positive. It will be negative when the 12-period EMA is below the 26-period EMA. When the MACD and baseline distance increase, it indicates a growing distance between the two EMAs.

MACD = 12-period EMA – 26-period EMA

Signal Line = 9-day EMA of MACD

Histogram = MACD Line - Signal Line

The chart below breaks down the three aspects of the MACD indicator.

When the MACD crosses above its signal line, this indicates that a trader is in a position to buy the security, while when the MACD crosses below its signal line, it’s an indication to sell or short the security (selling short is not advised, beware).

MACD's data can be represented with a histogram, which maps the distance between the MACD and its signal line. When the MACD is above the signal line, the histogram will be above the MACD's baseline, and vice versa. The MACD histograms are used by traders to identify when the bullish and bearish momentum is high.

MACD Indicator Interpretations

The MACD is designed to focus on the convergence and divergence of its two moving averages.

Where divergence happens when the moving averages go in opposite directions, while Convergence occurs when the moving averages move closer to each other. This is the foundation of how buy and sell signals are generated using the MACD Indicator.

Below are a few easy-to-understand signals generated by the MACD. Keep in mind this is a basic interpretation and as you practice and continue to read more material, you can have much more advanced readings, which will reduce false signals.

When the MACD line crosses above zero, it indicates a bullish trend, while a bearish trend will be indicated by the MACD crossing below zero.

When the MACD line crosses the baseline back and forth, MACD traders will avoid the market to deal with minimal portfolio volatility. If you see this, you should really stay away from buying options, as it shows no clear trend.

A stronger signal is indicated when the divergence between the MACD and the price action is in line with the crossover signals.

You can see a breakdown of the basic interpretation in the chart below. Please note that this indicator is lagging, so it's quite hard to use as a way to predict future price movement. It's really about riding the wave of momentum.

MACD Bullish Divergence and Bearish Divergence

When the momentum of a security price is waning, a divergence indicator is meant to correctly show that a reversal is imminent. When an indicator makes lower highs while the price is higher, this is called a Bearish Divergence. When the price makes lower lows and the indicator makes higher lows, this is called a Bullish Divergence. Divergence is one of the most powerful aspects of this indicator.

You can measure divergence via the histogram as well as the signal line. You can even draw support and resistance lines on this indicator (they may even be more meaningful than drawing them on pure price charts).

Look at the example below, which shows a bullish reversal using divergence. The histogram never made a lower low in this example, but the price did. Eventually, the MACD's bullish divergence signals correctly foreshadowed price-making new highs shortly after. I added a horizontal line at 0 to indicate when Bulls and Bears are in control (just a bit more pleasing to the eye).

Conclusion

The MACD indicator is commonly used by traders to detect when the current momentum in a stock’s price may indicate a change in its underlying trend. It is also important to note that since the indicator uses historical data, it can be referred to as a lagging indicator and will reverse course after a price action change has occurred. Therefore, it's important to note this severe limitation and possibly use other indicators/signals to exit your position. Although it was meant to be a multi-use indicator with several different parts, I think it really falls short on its own, but can be used in conjunction with other indicators to develop a more concrete trading system, where it will allow you to ignore a lot of the false signals the MACD indicator tends to generate.

It's best to use the MACD as a trend-riding signal, where you want to capture a strong trend briefly. Remember, it's not good to let you know when it's time to exit unless you interpret histogram shrinking as an exit entry (basically, as the histogram Y-axis shrinks).

One of the best ways to create a trading system is to scan the market daily, where you find stocks with their MACD line above the signal line (bullish buy signal). You can further backtest this strategy and continually add further refinements until you have something close to beating the buy-and-hold strategy. This is a great starting point for creating a trading system. For those looking for a world-class scanner and backtesting tool, sign up for TrendSpider, and use the links provided here for up to 40% off. Make sure to check out the "enhanced" package, which offers weekly one-on-one sessions!

For those interested in other indicators, please check out the Stochastic Oscillator.

Is Your Stock Trading Service Scamming You?

2026-05-25T11:16:57.027-07:00

The following is a guide I compiled to help prevent people from being conned by fraud when dealing with stock trading. Remember this applies to any medium (e-mail, websites, forums, TV, Discord rooms, Twitter (X), and so on).

Stock trading and Social Media are a match made in heaven. Stock traders heavily rely on social media for news and trading ideas. However, there is one alarming trend: many con artists can profit from their followers by selling misleading subscription services or having them follow their pump-and-dump schemes. Recently, the ATLAS trading group was indicted for stealing 125 million from inexperienced, naive traders via Twitter/X and Discord. However. Somehow, they got out of a jail sentence.

The finance world is the most unethical/dishonest place (remember the economic collapse of 2008). Some of the dishonesty that accompanies subscription services is due to competition. Each service has to do a "bit more" than competitors. It snowballs! People must advertise in "creative" (dishonest/misleading) ways to gather their followers' attention.

It is important to highlight that even the slightest twist of the truth is still misleading, as that can be a huge difference when trading the Market. Here are a few tips that should help identify dishonest/misleading stock traders on social media:

11) The trader in question speaks with 100% certainty. If someone speaks as if something in the market will happen at 100% (ex, "Apple will go to $200 by Friday"!), that person is full of it. Markets, for the most part, are unpredictable. There are just too many forces coming together for predictions to be consistently reliable.
10) The trader claims to have the market figured out with a special formula (ex. a better way to price options). Uh no! Not possible. This is an outrageous claim; only those not well-versed in the market will accept this reasoning. If it were true, a hedge fund manager would hire this person. They would be bigger than BlackRock.

9) The trader claims to be making 1000% on each option trade. If this is true, what is this person doing on Twitter? This seems to be the source of many retail investors messing with out-of-the-money option strategies, due to a lot of "fakes" promoting this dangerous strategy. If someone is making 1000% on each trade, what are they doing on Twitter, babysitting their subscribers for a fraction of the profits they are allegedly making? After the 10th trade, that 1000% gain becomes over a million dollars.

Also, beware of those who trade options professionally for a living. Trading options and being profitable over a long period is nearly impossible. Either they are lying, or their subscription services involve them buying low-volume option strikes, which, when followed in the trade, causes the price to spike, thus making their trades quite profitable. In other words, a low-volume option pump-and-dump (similar to penny day trading services).

I've noticed scammers have adapted through the years; they will often post one huge loss over social media along with an inspirational quote. Their simps will often just reply, thanking them for their honesty and how humbling this is. This strategy is there to let your guard down. It's often a trade they gave that is really hard to hide so being honest about this particular loss just gets you to trust them more, for "being honest" unlike others out there. BEWARE.

8) The trader in question never makes a bad call. A lot of charismatic people can spin any call they make into a "good call". Beware. I see this happen all the time. Also, watch out for quantity versus quality. A good strategy to trick people is just to spew a bunch of trade setups nonstop, so many that people can't keep track of them. Then at the end of the day or week, just retweet your "good calls". It's not that hard; 50% of the time you will be right in guessing the direction!

7) The trader doesn't act professionally, and tweets don't seem to be written intelligently. Warning SIGN! If someone can trade the market using a winning strategy, their IQ should be high enough to speak and act properly on Twitter!

6) The trader is a "beautiful" girl (ex., current model on the side) and is now trading the market.

People used to post pictures of fake "model" women on social media pretending to be traders when social media first became a thing. However funny enough, "model" women caught on, and now actually pretend to be successful traders, posting traders every so often, and then posting their travel, with the occasional bikini picture every 10-15 days. They will also mix and mingle with other traders in person and post pictures. This gives the idea that they are legitimate. You will see them at your favorite Trading Conference in Vegas or Hawaii. All this is designed to make them seem more legitimate.

Their trading content is often very superficial and generic, but guess what? Some guys eat that stuff up! I guess there is some biological feature where guys tend to drop 50 IQ points in front of a woman they find attractive.

Beware of this model turned "amazing trader". Eventually, they end up building a huge follower base and will launch a private trading service. They have no business offering trading advice. Some may be savvy and just end up peddling a pump-and-dump scheme with no paid service to be found.

This is not to say that because they are women, they cannot trade. This could be said about "model" guys. Often, these types of traders will trade crypto and provide commentary on that market closely.

5) The trader doesn't keep a proper account of his/her calls. If someone is making claims, at least try to find a PnL spreadsheet with actual exits and entries that a person leading the subscription service actually took. This, unfortunately, doesn't fully verify anything, but this is the best we can do.
Also, if a service shows you a spreadsheet with a crazy amount of positions (hard to put a number on how much is too much), they are probably paper trading. It's ridiculous to think someone can manage 15+ live positions; this is a huge hint at paper trading. Since it's very possible they took 30 positions, stopped out of 15, and now have 15 positions all green (of course, all theoretical). Not practical. The slim chance these are real, you will get eaten up alive, trying to pick and choose these winners anyway, since it's doubtful one can follow all these "buy signals". In reality, even if these claims are real, one must have a huge, good-sized account, at least $50K.

4) Doubt theoretical profits. It’s not that easy to spot fraud; there really doesn't exist any way to fully verify actual profits (maybe a neutral hired auditor). Another way to spot fakes is to ignore whatever claims they make about their service (I've noticed people have been very creative in spouting less-than-impressive results as something amazing). You will notice that with a lot of services, if you dig through their websites, they keep actual trading results in an Excel sheet. You'd be surprised how truthful these are, versus the claims these people make on Twitter. For whatever reason, these Excel sheets show more of the true story, and you will usually see something less impressive (ex., those .5% theoretical gains are actual .5% losses coupled with the fact that this service costs $100 a month).

Here is the catch, though: the results on the Excel sheet are sometimes shown using fuzzy math. They don't always include the cost of commission (especially with options), and they often include theoretical buys and sells. Being able to show your results in terms of theoretical buys and sells can give the appearance that a Twitter trader is making a lot of money, but in reality, they are not. The theory is one thing, the actual execution is different (so many variables can cause these trades to go wrong).

Try to ignore results that show cash value. I see many services touting that we made "$1,000 this week". What you should be asking is: What is the return on the investment? That $1000 could be a profit of $100,000, and often, a 1% gain when the market is up 6% is not very impressive. Profits should be shown in terms of percentages, not actual money (this is the easiest way people trick others). That 1% gain for you may be $19 when you are paying $100 a month for that sub-service.

In conclusion, anyone using theoretical profits should doubt; this is a major red flag! The actual trades being executed by this stock Twitter trader should be recorded. At the very least, percentages should be shown of actual trades.

3) Ignore CNBC/Fox Business and other TV Channel Personalities. It is best to avoid CNBC traders’ advice on Twitter; don't even touch the services they are selling.

2) Be wary of stock traders with a lot of subscribers who probably no longer trade (they make at least $150K a year with their subscription service). You can tell those who no longer trade by how often they tweet during trading hours; they tweet lots of ideas (as opposed to tweeting about their actual POSITIONS). They also often post obnoxious trading quotes. Real traders don't have time to mess with Twitter talking (tweeting 5+ tweets an hour) about stock setups and market commentary.

This means they are making more money with subscribers and are content not putting their money at risk in the market. In other words, whatever edge they are trying to sell to you is not that impressive (however, it might be better than what you can do by yourself). There is nothing wrong with this ethically. Just be aware of it.

1) Avoid those who are not humble when it comes to the market and those who brag about huge gains (ex, "Only I know this stock"). Real winning/consistent traders know the market is not something you can take for granted. Those who get cocky will eventually get a huge beating from the market. Either that or the person in question is a paper trader.

A Beginner's Guide On Learning How To Trade

2026-05-21T12:39:31.294-07:00

Stock trading can be a rewarding skill to acquire, offering insights into financial markets and potential opportunities for personal economic growth. For beginners, the journey into stock trading requires a solid foundation of knowledge and understanding. This article provides a starting point by highlighting various resources beneficial for learning stock trading.

Ask Experienced Traders For Advice

One of the best ways of learning how to trade is by approaching experts in the area and asking intelligent questions. Successful traders may be reserved about the methods they use to trade, of course. However, if you ask them what they think and feel in particular situations, and how they deal with their emotions when trading, you may receive many life-changing tips. In fact, we can almost assure you they’d love to do it. Everyone likes to be a mentor if the mentored person is truly interested. After all, if he is a trader, he is most likely passionate about it.

Learn by Reading and Researching

Suppose you don’t have the opportunity to learn directly from an expert trader, probably because you don't know any. In that case, there are other ways you can acquire knowledge on trading: reading and researching. In the stock market, an incredible variety of books are written on the subject. However, for beginners, it is vital to know about the specific strategies and methods of analysis, traders, and the way they think. The Internet is crowded with information; finding some for ourselves to learn is as simple as googling what we want to know and identifying reliable sources. Then read 10 articles about it and draw your own conclusions.

A good starting point is reading all the articles on this site under "Stock Market Education". For those who don't have the time to read all the articles here, a few great starting points from this website would be learning about Japanese candlesticks, as well as a breakdown of technical indicators and how useful they really are.

Great Trading Books

Let’s recommend a quick book trading checklist that I’m sure will help you in the process of becoming a successful trader. Here is a handful of useful and valuable books:

Henri Lefevre’s book Reminiscences of a Stock Operator (1923), written in honor of Jesse Lauriston Livermore, is well-known as Wall Street’s "Great Bear" and "Boy Plunger", and is a really practical book. At the beginning of the 19th century, Livermore was one of the main traders on the Wall Street stock market. Through the book, Lefevre illustrates Livermore’s way of thinking, strategies, and concepts regarding trading.

Jack Schwager’s The Market Wizards and The New Market Wizards are really useful and enlightening pairs of books created from the basis of conversations with the best traders from markets of diverse markets. By reading these books, you will have the golden opportunity to get familiar with the habits that top traders have to be successful.

Michael Covel’s The Complete Turtle Trader portrays a trial whose origin was a discussion between a pair of traders. Led by a trading expert, the training process of some specifically chosen people, as well as what comes out of it, is shown in the book.

You can also head over to my list of the best Must-Read Stock Trading Books to help you become a winner.

Internet, Research, and Trade

There are countless online resources to learn how to trade. You can research specific topics related to trade on specialized websites. Additionally, you can try different stock trading platforms using demo accounts and see which one fits you most. In these, you will quickly see how possible and even easy it is to find a great deal of valid, useful information.

What you can do to learn:

Learn from other traders through the interaction between them in discussion forums.

Use your Stock trading platform information, Discord trading rooms, social media, and also Reddit boards. Here is a list of the 100 Best Stock Trading Blogs.
Learn via YouTube Videos, a simple search like this will lead you to countless educational materials: Learn How To Stock Trade via YouTube.

Use the technical indicators provided by your stock trading platform or broker. These will lead you to acquire experience and knowledge on analysis and technical indicators. I personally recommend TrendSpider charting software. They have the latest cutting-edge indicators and a great price (use the link for up to 40% OFF). Additionally, they have one of the most extensive YouTube libraries explaining how to use their site's indicators and features. I recommend their Enhanced package, which comes with weekly one-on-one training.

The Internet and online trading also allow more accessibility to trade. You can open a Stock account with a tiny amount of money and test yourself in the business, especially with the Robinhood era, as now the cost to trade is essentially free. However, I recommend one of the bigger brokers like E*Trade or Ameritrade, as Robinhood and other budget trading platforms are not reliable when the market becomes very volatile.

New Era of Learning - Artificial Intelligence

Utilizing AI bots for stock trading is an increasingly popular method among traders. Platforms like ChatGPT offer a fresh perspective on market analysis and trading strategies. These tools are in their early stages, often compared to the 'Wild West' due to their novel and untested approaches, yet they hold potential for both educational and financial benefits in the stock market. As AI technology continues to evolve, these bots are rapidly improving, providing more sophisticated market insights. It's important, however, to use them with an awareness of their limitations and the inherent risks involved. For those interested in using AI bots in trading, my article is a helpful resource. It outlines effective ways to utilize tools like ChatGPT for stock trading, serving as a good starting point for anyone looking to integrate AI into their trading strategy. You can read it here: Top Stock Trading Prompts for ChatGPT.

Conclusion

To summarize, becoming skilled in stock trading involves various learning methods and resources. It's crucial for beginners to seek advice from experienced traders and to engage in extensive research and reading. Starting with basic concepts such as Japanese candlesticks and technical indicators is highly recommended. Reading the established trading books mentioned above can be a great starting point.

The AI revolution now adds additional learning opportunities through online resources, interactive platforms, and new tools like AI trading bots, which can provide different perspectives and trading simulations. However, these tools should be used with caution due to their novelty. Online trading platforms can also provide valuable hands-on experience, crucial for understanding market dynamics, especially those that allow accounts for "paper" trading (trading without real money).

Remember, practice makes perfect, but it's important to acknowledge that many people struggle to become profitable in stock trading. You might be one of the few who succeed. Finally, I strongly advise avoiding options and flashy traders on social media, as they are often involved in scams.

How to Make Money on Kalshi

2026-05-16T10:23:32.258-07:00

Most people approach Kalshi the wrong way.

They try to “be right.” They argue macro narratives. They hold positions to settlement.

That’s not how experienced traders approach it.

Kalshi is a pricing market.

If you understand probability, expected value, liquidity, and settlement mechanics, you can build an edge. If you don’t, it slowly drains your account.

What Kalshi Really Is

Kalshi is a CFTC-regulated binary prediction exchange.

Every contract settles at:

$1 if YES
$0 if NO

If a contract trades at $0.32, the market implies a 32% probability.

Your job is not to predict the future. Your job is to determine whether 32% is mispriced.

Edge = Expected Value (EV), not conviction.

How Traders Actually Make Money on Kalshi

Mispriced probabilities
Timing & liquidity shifts
Settlement rule precision
Event-driven volatility

This is closer to probability-style trading than traditional betting.

Want to test it without committing real capital? Get $25 free on Kalshi and treat it like a structured practice account.

The “Bet Everything NO” Idea

Short answer: It works sometimes.

Long answer: It works selectively and fails badly when misused.

Why NO Positions Often Look Attractive

Many markets are structured around deadlines:

“Will approval happen by X date?”
“Will CPI exceed Y?”
“Will recession be declared by Z?”

Processes take longer than expected. Deadlines slip. Bureaucracy moves slowly.

Because of that, YES contracts can be slightly overpriced due to optimism.

When NO Has Real Edge

Short-dated contracts
Process-based approvals
Multi-step regulatory outcomes
Hype-driven narratives

You are betting against timing, not truth.

Why NO Eventually Fails as a Blind Strategy

1) Fat-tail risk
One low-probability YES resolving true can erase weeks of NO gains.

2) Capital drag
NO positions tie up capital for long durations.

3) Market efficiency improves
Edges shrink as participation increases.

Kalshi Strategies That Work in Practice

1) Selective NO Bias (Low Risk Base Strategy)

Tight timelines
Multi-step approvals
Over-optimistic sentiment

Risk small. Exit early if pricing shifts.

2) Buy YES Early, Sell the Hype

Buy when liquidity is thin
Sell into media-driven price spikes
Do not hold through binary resolution

This converts Kalshi into a volatility market, not a prediction contest.

3) Settlement Rule Arbitrage

Every contract specifies:

Data source
Time cutoff
Specific wording

Minor wording differences create opportunity.

4) Event Volatility Harvesting

During CPI, Fed decisions, elections, spreads widen. Skilled traders enter early and exit before normalization.

Common Mistakes

Confusing belief with probability
Holding every trade to settlement
Ignoring capital efficiency
Oversizing positions
Trading headlines emotionally

Simple Framework

Risk 3–5% per contract
Track expected value, not win rate
Favor short-duration contracts
Take profits before settlement when possible
Always read settlement wording

FAQ

Is Kalshi gambling?

No. It is a CFTC-regulated exchange trading binary event contracts.

Can you consistently make money on Kalshi?

Yes — but only if you approach it as probability trading and manage risk appropriately.

Is betting NO a guaranteed strategy?

No. It works selectively, not universally.

Final Takeaway

The edge on Kalshi is pricing, structure, and discipline.

Test it with $25 free: Claim $25 on Kalshi

Trading event contracts involves risk. This article is educational and not financial advice.

The EMA Cloud: The Next Generation Of Indicators?

2026-05-12T10:34:00.000-07:00

EMA Cloud Indicator (Quick Answer)

The EMA Cloud is a trend-following indicator (popularized by Ripster) that plots two exponential moving averages (EMAs) and shades the area between them. Traders use the cloud to quickly see trend direction and likely support/resistance zones during pullbacks.

TL;DR

Green cloud (fast EMA above slow EMA) = bullish bias
Red cloud (fast EMA below slow EMA) = bearish bias
Best in trending markets; can whipsaw in sideways chop
Common settings: 5–12, 8–9, 20–22, 34–50

Jump to: How to use · Best settings · Step-by-step · Backtesting (TrendSpider) · Examples · FAQ · Conclusion

Most traders use the same public indicators in the same obvious ways—so they end up with the same results. Real edge comes from thinking outside the box, testing variations, and building a repeatable process. The EMA Cloud is a “simple-but-useful” twist on traditional EMAs that makes trend and pullback zones much easier to see at a glance.

How to Use the EMA Cloud Indicator

EMA Clouds are built from two EMAs. When the faster EMA is above the slower EMA, the shaded area becomes a bullish (green) cloud. When the faster EMA drops below the slower EMA, the cloud flips bearish (red).

In the SPY example above, the 20 EMA is above the 50 EMA, creating a green cloud. As price pulls back into the cloud, many traders treat it like a dynamic support zone—a place where price may bounce and continue the trend.

If this concept feels familiar, that’s because it overlaps with the logic behind the Ichimoku Cloud System: a shaded zone that helps visualize trend and likely support/resistance.

Best EMA Cloud Settings

Common EMA Cloud settings include 5–12, 8–9, 20–22, and 34–50. The first number is the faster EMA, and the second number is the slower EMA. The shaded region between them becomes the cloud.

According to Ripster, popular combinations include:

5–12 or 5–13 for a fluid trendline (often used for day trades)
8–9 to help identify pullback/bounce areas
34–50 as a higher-timeframe trend filter (bullish above / bearish below)

Below is an example where the 34 EMA is below the 50 EMA (34–50 setting). The cloud turns red and starts acting as resistance.

Many traders layer multiple clouds: 34/50 as the long-term trend filter, plus faster clouds for pullbacks, adds, and exits. This creates the “rainbow” cloud effect shown below.

Step-by-Step Guide on Using the EMA Cloud

Find the indicator on your preferred platform such as TrendSpider (exclusive discount code available via the link). As new as this indicator is, it’s only available on a few platforms—currently TrendSpider and TradingView.
Add your preferred moving average type (commonly the exponential moving average). Use one longer-term set (e.g., 34–50) and one shorter-term set (e.g., 8–9).
Much like Ichimoku, you can shift the cloud forward/backward using an Offset. Offset 0 keeps it aligned to current price; higher values push it forward. Test this—offset can improve visuals, but can also create false confidence if you don’t validate it with real results.

Backtest EMA Clouds (Instead of Guessing)

EMA Cloud settings can work great in trending markets, but the best combo changes by ticker, timeframe, and volatility regime. The fastest way to improve results is to backtest and scan setups consistently.

Backtest EMA Cloud settings across markets/timeframes
Use automated scanning to find strong trends faster
Confirm entries with multi-timeframe analysis
Reduce whipsaws by filtering out sideways chop

Open TrendSpider (exclusive discount code)

Disclosure: This is an affiliate link. If you use it, I may earn a commission at no extra cost to you.

Chart Interpretation

Bullish: When the short-period EMA crosses above the long-period EMA, the cloud turns green.
Bearish: When the short-period EMA falls below the long-period EMA, the cloud turns red.

Pay attention to inflection points where the cloud flips colors—these can act like trend confirmation signals. But avoid getting chopped up: use settings that don’t flip too easily in sideways markets.

Examples

Here is another example showing how SPY repeatedly reacts to the EMA Cloud over time (daily chart, 20/50 EMAs):

Below is an annotated example from Ripster using a 1-minute AAPL chart and the 34/50 EMA cloud:

EMA Cloud FAQ

Is the EMA Cloud good for day trading?

It can be, especially in trending sessions. For choppy markets, consider stricter filters (higher timeframe trend, fewer flips, or confirmation).

What timeframe works best?

There is no universal “best.” Many traders use a higher timeframe (daily/4H) for trend bias and a lower timeframe for entries.

What are the best EMA Cloud settings?

Common sets include 5–12, 8–9, 20–22, and 34–50. The best settings depend on the market, timeframe, and volatility.

Is EMA Cloud the same as Ichimoku?

No. They share a “cloud” concept visually, but Ichimoku has multiple components and different logic. EMA Cloud is simply two EMAs with shading.

Next Reads (Build Your Edge)

Conclusion

The EMA Cloud is a rare “simple innovation” that improves how traders visualize trend and pullbacks using EMAs. The real key is to backtest settings on your markets/timeframes and learn when it works (trends) versus when it fails (chop).

If you want a faster workflow to test EMA Clouds and scan for strong trends, use: TrendSpider (exclusive discount code via the link).

Why You Should Never Trade The Market

2026-05-09T09:58:00.000-07:00

Note: I am a successful trader who has consistently outperformed the S&P 500 index since 2013, so please do not take the advice below as if I were a jaded, losing trader, because I am not. The article contains some excellent advice, and I recommend that some of you take it. I have had a 96% win rate since 2016. More about my trading system can be found here.

The Market is a tough place to make money. You will be hurt if you think you are a genius or know what you are doing. If you don't quit while you are on top, you eventually will be wiped out. If you are trading options, making a ton, and think you will continue in the long term, you are dead wrong. Those who trade options are most at risk.

An accurate risk management model needs to be developed to address the issue. This is proven by how the Quants could not predict or mitigate the 2007 Market crash and several hedge funds getting squeezed out of billions due to their arrogant Gamestop ($GME) and $AMC shorts. You are only kidding yourself if you think you are properly risk-managed because you are not. To be truly risk-managed, you must have a full understanding of the Market. In reality, no one has such an understanding (or they would be able to make unlimited money). Many of these "million-to-one" events seem to occur periodically, such as the GameStop Squeeze, the Coronavirus Pandemic, and the 2008 financial collapse. Blackswan events are just too common; the improbable continues to become a reality.

It's worth noting that at any point you have all your money in the market, you face the "Risk Of Ruin" (chance of losing it all). You never want to be put in that position, especially if you have an "edge" in the Market.

I think not all hope is lost. I have a few tips that can help make sure you can trade the market for the next 30 years. However, the catch is that you need to have a real edge. I am not talking about the phony fake advice posted on all of Twitter or what these sub-services try to sell you by using MACD indicators and "break out" setups, drawing silly triangles all over their charts. Those don't work. Real edges aren't given away. They aren't sold; they are kept secret.

First, you need to have a quick, accurate edge (don't bother, unlikely any of you have or ever will discover one), one that allows you to be in and out in 24 hours with good profit (not day trading). This edge should have at least a 75%+ accuracy. You have an exponentially higher chance of never getting hit hard in the Market where you trade quickly (within an 18-hour time frame). This is an important concept; the longer you are in the Market, the more risk you take. Note that an 18-hour time frame can span two trading days. Where you buy at the close of one day and sell at the opening of another.

Your edge won't last forever (assuming you have a real one), often "setups" (use the term loosely) can evolve. You will need to pick up on this as fast as possible without ever going broke or getting hit hard. To do this, the only solution that may save you is never investing more than 3-5% of your portfolio. This way, you can either adapt your edge if it isn't working or realize you no longer have one and can get out safely. Don't bother with "hedging your position"; that is nonsense. Correlation is made to break; it isn't a guarantee. When things go really bad (i.e., when you need a hedge the most), correlations get wiped out (look at the Coronavirus Pandemic: Gold, Oil, Bitcoin, and Stocks all wiped at once)!

Assuming your edge fits a quick time frame and is accurate, you *might* be ok trading via options. As your risk is now capped, and your upside is unlimited. In this case, you will need to always take money off the table quickly, it's okay to leave some profits on the table and hold a fraction of your initial option position to let the stock run (i.e. say you made 60% with options, sell enough that makes you some profit and leave the other options on the table for a potential continuation).

I have often debated the best way to trade, not the one that makes the most money, but the one that has the highest chance of making money over 30+ years. That is to trade quickly and invest very little of your portfolio. The catch is that this type of trading requires a huge account, where trimming and 3-5% gains matter in terms of profitability. In other words, the more money you have, the more money you will make.

The strategy I listed above is unlikely to help many of you because finding a truly profitable edge is unlikely. If it does exist, you won't find it on Twitter or in books. Everyone needs to realize they are not a genius; the Market is nearly impossible to beat in the long term. It is just better not to play it. You will go broke in the long term. You are unlikely to be the exception. Just put your money in an index fund.

Now, for the next step, if this article has inspired you, read our in-depth article on how to create an edge for your current trading syste,m as well as how to create a trading system. These articles provide information on how to create a trading edge & system to enable you to be that 1% that makes money.

Y4Trade: How One Prop Firm Is Transforming Trader Education and Funding

2026-05-03T11:27:00.000-07:00

In a world where prop trading has become one of the fastest-growing sectors in finance, a firm is connecting trading capital with real education and changing how traders succeed. That firm is Y4Trade, and in partnership with platforms like ChartLearning, it's helping traders move from theory to real profit.

Combining Knowledge and Execution

Today’s traders consume huge amounts of educational content—indicators, strategies, systems—yet many still fail to become consistently profitable. True results don’t come from information alone. They require structure, psychological readiness, and an environment that rewards performance.

That’s where Y4Trade comes in.

Unlike traditional prop firms that focus mainly on challenge fees, Y4Trade is focused on building successful traders. It offers a clear path: prove your skills, earn a funded account, and trade with institutional-quality support – without risking your own capital.

Thanks to partnerships with platforms like ChartLearning, traders don’t just get funding—they gain the mindset and method that helps them win.

A Modern Prop Firm Built on Trust

Y4Trade was founded by traders who experienced the frustrations of other firms—unclear rules, delayed payouts, and hidden restrictions. That’s why they built a platform based on transparency and fairness. In 2025, traders are responding with trust.

Why traders choose Y4Trade:

● Payouts within 24 hours

● Fair rules – no confusing daily loss limits or hidden resets

● No hidden fees – just a one-time challenge fee ● Own trading platform – with TradingView charts built into the interface ● Strong community – thousands of active traders on Discord every day

It’s not just a prop firm – it’s a complete trading ecosystem. How ChartLearning Supports the Y4Trade Mission

While Y4Trade provides capital and structure, ChartLearning helps traders understand market behavior on a deeper level.

Courses focused on price action, technical analysis, psychology, and strategies teach traders to think like professionals. Instead of blindly following setups, they learn to act with purpose and discipline.

Traders combining ChartLearning education with Y4Trade funding have a distinct edge: They don’t just trade because they can. They understand why they trade. Built for the Modern Trader

The 2025 market environment is dynamic and demanding. AI bots, fast-moving events, and global macro shifts require readiness. Y4Trade provides just that:

How it works:

1. Choose your challenge – based on your style and goals

2. Prove your edge – hit your target without breaching drawdown

3. Get funded – trade with real capital (80/20 profit split)

4. Scale and withdraw – weekly payouts, with optional scaling plans

Trading happens on Y4Trade’s own platform, with TradingView chart integration, so analysis and execution happen in one place. Who Wins with Y4Trade?

From intraday traders to swing specialists – they share one thing: a mindset.

They’re not gambling. They’re building systems. And with ChartLearning, they learn to make decisions based on logic, rules, and self-awareness.

Many receive their first payouts just weeks after getting funded. Some scale to six-figure accounts. But most importantly, they’re building long-term skills.

A Prop Firm That Understands Traders

Many firms promise funding, but lack a real path to sustainable success. Y4Trade is changing that – offering everything traders need:

● A fair evaluation process

● Fast, reliable payouts

● Education through ChartLearning

● A platform that respects trader freedom

This is the new standard in prop trading.

Curious how to turn knowledge into profit?

Find out more: www.y4trade.com

Join our community: Discord | Telegram | Instagram

Education partner: ChartLearning

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading is risky, and past performance is not indicative of future results.

The Truth About Stock Trading Discipline

2026-04-30T23:29:00.000-07:00

Traders often blame their losses in trading due to "lack of discipline" and mental breakdowns. The truth is, this isn't the actual problem causing you to lose money trading. There are many out there willing to sell their services to help you improve your trading psychology/discipline; these range from books, seminars, and even expensive weekly one-on-one video call sessions. The truth is, these products will only help you short term and are flat-out a waste of money. Many people who sell these products exploit inexperienced/naive traders.

The real underlying issue of why traders keep losing is that they lack a clear-cut profitable edge. A stock trading edge is defined as a set of consistent decisions (including a trading algorithm) used to buy and sell stocks. Following a profitable system will keep you "disciplined" because it guides all your decisions for you and removes emotions.

The list below is a series of steps on how I use my profitable edge/system to buy and sell stocks (important to note real edges aren't given out to the public as they fear they will no longer be profitable once publicized).

Run proprietary trading algorithm code to generate a stock list for the day. This is typically code used to scan the Market to find stocks that fit technical patterns that can be exploited as an edge. Note, this is basic; if you don't do this, you likely don't have a real edge. Getting a daily/weekly stock list from someone else will probably not keep you profitable long-term. Oftentimes times my watchlist will have 0 stocks for months and even years (not kidding).
Filter out your scanned stock list. This involves going through the list generated by step 1 and identifying whether the stock truly fits the desired pattern to exploit for a trade.

Determine the probability that the stock to trade will be a winning trade. The next step is to calculate the odds to see how likely this trade will be profitable (Should be approached exactly like a hand of Texas Hold'em poker). This involves determining how strong the pattern is, and what the market conditions are. Calculating probability comes with experience; it will be difficult and inaccurate at first. But slowly over time, you will get better and will adjust the trading size based on the probability that the trade will come out green.
Bound the worst-case scenario of the trade going badly. No matter how perfect your edge is, you're going to eventually have a trade that goes badly for you. In this case, you need to understand this in every potential trade you make and understand the worst case. For example, if it's an oil-related company or a Chinese company, the risk is high, and the stock could go to zero (this has happened more frequently than many realize). If it's a trade in a large-cap company like Apple or IBM, oftentimes if you are stuck in the stock, you'll end up getting paid a dividend while you wait to get out. So buying a Chinese stock versus buying a prominent established technology company has very different worst-case scenarios.
Come up with a buy-and-sell plan. Before purchasing, ALWAYS come up with a trading gameplan of when to buy, and when to sell (including stop losses). This includes deciding whether to buy the stock directly or use options (almost everyone should steer away from options!).
Reassure yourself that if this trade goes badly, you can afford to lose. Remind yourself again before purchasing the stock that this is a trade that you can afford to lose. Never trade with money you can't afford to lose; it will cause you to make bad decisions. This is why it's dangerous to aim to become a professional trader; it's just too much stress. Always treat it like a hobby until you make retirement-level money.
Decide on the size of the position you want to purchase. How much I decide to purchase the stock is usually a factor in the size of my account, the market conditions, my current confidence in your trading, the probability I think this will be a winning trade, etc. Keep in mind that #3 above will have a huge factor in what size you put in.

The list above is meant to help you understand the odds of the trading going well versus going badly and trying to position yourself to consistently make money on your trades, and when you don't, to minimize the losses. This is really what it means to be disciplined: following logical steps and completely removing emotions. If you don't have any steps to follow (that actually help make money), then, of course, you will attribute your losses to a lack of discipline. You constantly fool yourself into thinking all your bad trades are due to a mental breakdown, and all your winning trades are due to your amazing invisible system that's somewhere in your head. The cycle never stops until your account hits $0.

In summary, trading isn't about the discipline; it's about finding a real winning edge that you continually exploit over time to make money. The catch is that finding a real winning edge is almost impossible (no one will sell you a winning edge, it's just not how the world works). Hence, 95-99% of traders end up losing in the long term or, at the very least, never beat a buy-and-hold strategy. Remember, focus on finding a very reliable edge, and if you can't find that, quit the Stock Market and save your money; otherwise, the Market will get the best of you in the long run. For those who want to create a trading edge, this in-depth article I have written is probably one of the best starting points you could ask for.

For those serious traders looking to make a change, I've written about two trading systems that are a great starting point for becoming profitable: The Elder Impulse System and Trading With Ichimoku Clouds. Be warned, though, that you will need to tweak them and put in the time to be profitable.

For those who really want to take their trading to the next level, it's a must to read my tutorial on how to create a winning trading system. Where you can plug in systems like Elder Pulse, and Ichimoku Clouds and see how well they do and how they can be improved upon.

Why Quantum Computing Is Bitcoin's Greatest Threat

2026-04-29T16:42:00.000-07:00

As Bitcoin continues to dominate conversations in technology and finance, another revolutionary advancement—quantum computing—is rapidly progressing. This dual momentum raises an intriguing question: What threat does quantum computing pose to Bitcoin?

Understanding Bitcoin’s Security Framework

At its core, Bitcoin’s security relies on robust cryptographic algorithms. These algorithms are designed to be secure against attacks from traditional computers:

Elliptic Curve Digital Signature Algorithm (ECDSA): This algorithm secures wallets and verifies transactions, ensuring the integrity of Bitcoin’s network.
SHA-256: A cryptographic hash function underpins Bitcoin’s mining process and blockchain structure, making the system tamper-resistant.

These technologies are highly secure against classical computers. However, quantum computers operate on an entirely different paradigm, which could make these algorithms vulnerable.

The Quantum Cryptocurrency Threat Explained

Quantum computers leverage principles of quantum mechanics to perform computations far beyond the capabilities of classical machines. Here’s how they could disrupt Bitcoin:

Breaking Private Keys: Mature quantum computers can efficiently use Shor’s algorithm to break elliptic curve cryptography. This means they could derive private keys from public keys, allowing malicious actors to steal funds from exposed wallets. Robbing everyone blind, starting with exchanges.
Mining Vulnerabilities: Using Grover’s algorithm, quantum computers can solve SHA-256 hashes significantly faster than classical computers. This would disrupt Bitcoin’s mining process and undermine its consensus mechanism.

Mitigating the Quantum Threat

While the risks are real, several mitigating factors and solutions exist:

Timeframe for Development: Quantum computing technology is still in its infancy, but it has made huge strides via Google! Luckily, today’s quantum computers lack the stability and computational power to break Bitcoin’s cryptography. Experts suggest it could take 10 to 20 years or more for quantum computers to pose a credible threat, but with the introduction of AI and recent strides, we don't know the true timeline. I suspect it may be much shorter.
Limited Public Key Exposure: Bitcoin wallets are only at risk if their public keys are exposed. When funds are stored in a wallet that has never been used to make a transaction, its public key remains hidden, reducing the immediate risk for dormant wallets.
Upgradable Protocols: The Bitcoin protocol is not static. Developers are already exploring quantum-resistant cryptographic solutions, such as lattice-based cryptography. These new algorithms could replace current ones, ensuring Bitcoin remains secure in a post-quantum world. However, the Bitcoin community has never really agreed on anything, especially when it comes to halving the coins. So will they be able to move fast and nimbly enough?

The Path Forward

Short-Term: Bitcoin’s security remains robust against current quantum capabilities. For now, other threats exist, but they are not in the scope of this article. However, it's worth noting that there are other cryptocurrency coins created using technology that are supposedly quantum-proof. So, these dangers are known to some in the community. But whether they can succeed or catch on in popularity is a topic for another article.
Medium-Term: The Bitcoin community must prioritize implementing quantum-resistant cryptographic upgrades if quantum computing progresses rapidly.
Long-Term: As quantum technology matures, it will drive innovations in cryptography and security, enabling Bitcoin to adapt and thrive in the face of new challenges. That is the hope, of course...

Conclusion

Remember that those developing quantum computing have little incentive to reveal how far along their technologies truly are. A foreign country with interests opposed to the United States could develop advanced quantum computers in secrecy. Such an entity might quietly exploit vulnerabilities in Bitcoin’s cryptographic systems, robbing vast amounts of cryptocurrency before any public announcement.

While this scenario is not guaranteed to occur, it remains a possibility. As controversial as it is, Bitcoin must prioritize becoming quantum-proof to mitigate this risk if such a transition is feasible. Failure to act swiftly could lead to severe consequences for the cryptocurrency’s future.

For those interested in a primer on how cryptocurrency works.

Mastering the Art of Japanese Candlestick Reading

2026-04-26T12:11:00.000-07:00

Throughout my decade of trading, one of the most important skills needed to be successful in the Stock Market is mastering the art of Candlestick reading. Candlestick reading can give you an indication of highly accurate future price movement.

There are easy patterns, complex patterns, fake patterns, and so forth in Candlestick reading. That is why a careful study and countless reviews of thousands of candlestick patterns over decades of stock charts will be required to give you the experience needed to develop an edge in the Stock Market. This article will provide an overview of Japanese Candlesticks and my thoughts. Hopefully, that will inspire you to master your art form of interpreting them when chart reading.

The Basics of Japanese Candlesticks

Candlestick roots originate from Japan, where it was a part of the technical analysis of the merchants trading rice in the 17th century. It is believed that a well-known rice trader named Munehisa Homma, belonging to Sakata, was the first to develop candlesticks. Though its present form was conceived by Charles Dow of the US in 1900, most of its guiding principles remain the same.

A candlestick may be defined as a form of a price chart used for technical analysis of a particular security. It shows the opening and closing prices and the highest and lowest prices of a stock for a given period. The fat and wide part of the candlestick is known as the real body. It compares its closing price with the opening price, indicating whether the stock closed higher or lower than the actual price. Take a look at the picture below, taken from Wikipedia.

Why Learn Candlesticks?

Broadly, candlestick charts show a specific stock's opening/closing and highest/lowest price for a specific period. By reading the stock behavior at a particular time via candlesticks, certain patterns can form that hint at future price movement. This is the most important aspect of candlestick reading: the ability to predict future price movement! Several types of compelling candlestick patterns can predict future prices. I love to combine Japanese Candlesticks with my other favorite technical indicators for a powerful and very accurate trading system.

Types of Candlesticks

Some of the most famous candlestick patterns include (the goal is to know these by heart):

Dragonfly
Hammer
Morning/Evening Dojis
Bearish/Bullish Harami
Engulfing Bullish/Bearish
Gravestone
Big Candles
Dojis
Dragonfly and Gravestone

Look at the cheat below for a representation of many of these patterns listed above.

How To Make Money With Japanese Candlesticks

Below is an example of very powerful candlestick patterns that can be exploited to make money if they can be identified in real time. However, I must emphasize that studying these patterns in the past and during the present requires a lot of backtesting and practice. This is where the "art form" comes into play.

The Bottoming Hammer (chart taken from Investopedia).

The Gravestone Doji hints at a bearish reversal. (chart taken from Chart Formations)

There are an endless number of simple and complex patterns to learn and explore. I go into depth about incorporating Japanese Candlesticks into a trading system, as well as covering the top 5 best patterns to trade.

For a more advanced starting point, head over to Amazon and check out many of the books, such as Japanese Candlestick Charting Techniques.

Conclusion

Chart and candlestick reading is an art. Make sure you understand it, and as the time comes, you will gain experience in reading these patterns to maximize your money in the market. It's important to remember that none of these chart patterns guarantees that you will end up a winner in the stock market. However, following candlestick patterns can increase the chances of you ending up in a winning zone--which very few have been able to achieve. That is why you must master reading them and not simply memorize them. Remember, mastering involves going over countless charts over the last few decades, as well as trying to predict in real-time as the candlesticks are formed.

The Truth About Technical Indicators: The Good The Bad and the Ugly

2026-04-25T11:00:00.000-07:00

When first introduced to technical analysis, it can be overwhelming and quite confusing, as a lot of jargon is thrown around. As the years go by, I focus less and less on technical indicators (chart patterns are much more useful, and I don't mean patterns like head-and-shoulder patterns). I find the indicators out there to be ineffective since they are so overused by trading robots and retail traders, thus taking the edge away.

The Reality of Technical Indicators

Early in my trading career, I followed Tom McClellan, and he has always emphasized not to use the same tools everyone else does, as it takes away the edge. I have always taken that as motivation to find new/unique ways of interpreting indicators. For example, with the RSI, I don't look at it to tell me whether a stock is overbought or oversold; there is so much to the indicator that many don't discuss (or notice). In fact, trying to use it to tell if a stock is overbought or oversold is inaccurate and hard to profit from its signal. Ever notice that when a stock is more overbought, it just keeps getting more and more overbought? That's not a very useful way to exit/short a stock. However, I would rather keep the ways I read them to myself and maintain my edge. The point is, try to think outside the box, even when looking at other indicators, don't just go with the way everyone else reads them.

I cringe when people draw wedges and trend lines, saying, “Here’s a great setup”. Sure, these setups work occasionally, but often the stock trades sideways, going nowhere. Remember, just because something works occasionally doesn’t mean it’s profitable. It’s an insult to think that the market can be simplified by drawing lines on a chart. In reality, thousands of forces come together, giving the appearance of random movement with a bias towards trending higher (the market always goes higher as time passes).

It's important to understand the edge in everything you are doing, i.e., if you want to trade trend line setups, you need to make sure it actually has an edge. Remember, the key to trading is to beat the buy-and-hold strategy. So, if you are making money, it’s not enough,h it’s about making more than you would if you just held.

The Best Technical Indicators

My top 2 favorite indicators are RSI and Bollinger Bands. RSI is a very accurate way to represent price without all the noise. Basically, it measures how the speed and change of price movement, you can read more about the RSI here.

My absolute favorite indicator is Bollinger Bands. I cannot trade without them.

From Wikipedia:

Bollinger Bands consist of:

an N-period moving average (MA)
an upper band at K times an N-period standard deviation above the moving average (MA + Kσ)
a lower band at K times an N-period standard deviation below the moving average (MA − Kσ)

In short, it gives a range of what is statistically possible regarding price. So, 95% of the time, the price of a stock should be inside the bands. Therefore, being outside the upper or lower band is one of the most reliable ways to tell if a stock is overbought or oversold. However, this is only sometimes the case, especially during an earnings movement or surprise news event surrounding the stock. As an example, the chart below is AAPL and the Bollinger Bands. Note how often the Bands acted in areas where the price would bounce from! But only sometimes!

There are plenty of video tutorials on interesting strategies on how to use Bollinger Bands. I have written an article dedicated to helping you master Bollinger Bands. Hopefully, the article will help you think outside the box and create/maintain an edge!

Japanese Candlesticks

Every stock trader and investor should be comfortable reading Japanese Candlesticks. Flat out, they are the most reliable predictor of future prices. I've written an introduction to candlesticks in Mastering the Art Form of Japanese Candlestick Reading. It's a good tutorial to truly understand Japanese Candlesticks.

Combining Japanese Candlesticks and Bollinger bands is a killer combination of a high-probability setup. For example, if you encounter a stock that has lost about 30% from its highs, and is sitting right on its lower Bollinger Band, with a hammer candlestick, the stock will likely bounce hard. Just take a look at the example below using Apple's weekly stock chart.

I discuss various tips and tricks regarding Japanese Candlesticks and my favorite patterns in the article. Keep in mind, technical analysis is most reliable when you have a cluster of signals. In the example above, it's the stock hitting the lower Bollinger band, as well as the formation of a bottoming hammer candlestick. Both signals indicate a bottom is forming, which means a bounce may occur. That is the type of setup you want to look for (multiple signals confirming a direction).

Conclusion

I wrote this blog post to inspire people to focus on Bollinger Bands and the RSI, and to try to find new, innovative ways to use them compared to the current crowd.

For the dedicated reader, feel free to explore the Stock Market Education Library on this site, which includes countless articles on various indicators, giving you hints and tips on applying them and making money.

The Stochastic Oscillator: The Best Momentum Indicator?

2026-04-23T13:17:00.000-07:00

Day and short-term traders use technical indicators to analyze price movement for a short period, while long-term investors also use technical indicators to identify entry and exit points. There are two main types of technical indicators, which are:

Oscillators: These are technical indicators that oscillate between a local minimum and maximum; they are plotted above or below a price chart. Examples include the Stochastic Oscillator, Moving Average Convergence Divergence (MACD), or Relative Strength Index (RSI).
Overlays: These are technical indicators that use the same scale as prices and are plotted over the top of the prices on a stock chart. Examples include moving averages and Bollinger Bands.

The Stochastic Oscillator is an indicator that compares the position of a security's closing price relative to the highest and lowest prices during a specified period, typically 14 days. It gives readings that oscillate between zero and 100 to indicate the momentum of a security's price movement.

George Lane, a financial analyst, developed the stochastic oscillator in the late 1950s for use in the technical analysis of securities. He was among the first researchers to publish papers on applying stochastic indicators, especially compared to the Elliott Wave Theory and Fibonacci Retracement. In addition to gauging the strength of price movement, the oscillator can predict market reversal turning points.

Stochastic Indicator Calculations

The Stochastic Oscillator is plotted as two lines: %K and %D.

%K = 100(C - L14)/ (H14 - L14)

Where:

C = the most recent closing price

L14 = the low of the 14 previous trading sessions

H14 = the highest price traded during the same 14-day period

%K= the current market rate for the currency pair

%D = 3-period moving average of %K

This formula works based on the assumption that closing prices are more important when it comes to predicting market conditions.

How to use the Stochastic Indicator

When the security price is making a new high or low that is not reflected on the Stochastic Oscillator, divergence occurs. It is worth noting that the Stochastic Oscillator may give a divergence signal sometime before price action changes direction.

For example, when the oscillator gives a signal of bearish divergence, the price may continue moving higher for several trading sessions before turning to the downside. The failure of the oscillator to reach a new high alongside price action indicates an impending market reversal from an uptrend to a downtrend. You can see an example below using Apple's ($AAPL) weekly chart, where the oscillator did not confirm the new highs.

Similarly, a bullish divergence occurs when the market price makes a new low, but the oscillator does not move to a new low reading. Bullish divergence indicates a possible upcoming market reversal to the upside. This is the reason why it’s recommended to wait for some confirmation of a market reversal before entering a trading position. The 15-minute chart is the best time frame for day trading because it is not too fast and at the same time not too slow. Trading decisions should not be based on divergence only, but in combination with other elements.

Overbought and Oversold Levels

Another use of the indicator is to identify overbought and oversold market levels. When the Stochastic Oscillator value goes above the reading of 80, we are in an overbought market condition, which indicates that if you already have a long position, you should start reducing your position size or look for opportunities to sell the underlying asset. Conversely, when the Stochastic Oscillator value goes below the 20 reading line, it is considered to be an oversold market condition, which shows that if you already have a short position, you should start reducing your position size or actively look for opportunities to buy the underlying asset

Even though the overbought and oversold signals generated by the Stochastic Oscillator are quite reliable, it is important to note that these signals work best during a range-bound market. However, during an uptrend market, the Stochastic Oscillator becomes overbought, and during a downtrend market, the Stochastic Oscillator becomes oversold at a very fast rate and gives the illusion that the market is about to reverse.

Beginner-day traders usually complain that they placed a buy or sell order during an uptrend or downtrend after seeing an overbought or oversold signal generated by the Stochastic Oscillator, which resulted in a loss.

These issues with the Oscillator are why reading technical indicators is much more of an art. Where experience and the use of other indicators and elements in combination will decrease the probability you will get a fake signal, thereby maximizing your profits.

Conclusion

When used optimally, the stochastic indicator can help you gauge price movements a lot better in both trending and range-bound markets. It is possible to develop a strategy that produces sound signals regardless of whether the market is trending or range-bound. Stochastic divergence is the most useful indicator because it can be used with other indicators to eliminate losing trades and make entry signals more accurate.

I recommend back-testing the indicator, with as many charts as possible, and observing it in real-time, and see if an edge can be added to your current trading system, or simply create one from the start with the Stochastic Oscillator.

Measuring the Edge Of Your Trading System: Is It A Winner?

2026-04-19T17:59:00.000-07:00

Often, I hear many traders discuss making gains on certain trades in terms of net profit, such as "I made $10,000 on a swing long trade on XYZ." They will also say, "Made 5% on XYZ for a day trade." The biggest problem is that average traders need to understand the importance of analyzing performance metrics for their trading system or method. In Quantitative Systematic trading, the risk and performance metrics are the most important analysis of your process. Over the years, there has been a range of conflicting opinions on what is most important. The three most important metrics are P-Fac, Win-Ratio & Maximum Draw Down, but for now, we will focus on the importance of the Win-Ratio.

The Win-Ratio calculation:

#Winning Trades / #Losing Trades

The win ratio only focuses on the probability of your signal, system, or process's success after the trade has been executed and then closed. If your trade after the said signal has a positive return value, it's considered a win; if negative, it is a loss. Win Ratio is the method to calculate the positive or negative probability of your trading or system. Probability measures and evaluates the following: Risk, Luck, Likelihood, Chance, Uncertainty & Randomness. If these concepts are important to your trading, then you must consider probability, since it is the only way to factor in these concepts, deal with them properly, and evaluate your system's performance.

The win ratio is important because it shows the percentage probability of your signal being correct, and naturally shows you the edge you have in being right and having a profitable trade on said signal & position. The higher the Win-Ratio, the more probable your system's market-timing ability is and your strategy's robustness. The key to analyzing the Win-Ratio metric is not just the "higher the better" but how consistent the Win-Ratio is. This is where large samples of data come in. To eliminate bad data and misleading performance metrics, you have to test the system's signals on a large sample of data. To have statistically valid data from sampling to derive a reliable performance metric, the rule is always at least 100 trades, preferably 1000 trades or more, and of course, the more trades the better when calculating the win ratio.

So, for example, if you have only 10 closed trades and 8 of them were winners and 2 of them were losers, your Win-Ratio would be 80%. However, this is misleading and false since the sample size of the trades is too small to be consistent. The key is going back as far as possible with back-tested data or historical trades the further back you can go the better & more reliable the Win-Ratio is (some say further than 10 years is too much due to market regime change but that's a different debate which can be easily solved by comparing the 10 year to the X period longer and measure the difference) so in short the higher the number of trades and longer periods tested, the more consistent the Win-Ratio. The more consistent the signal, the more robust the signal/system becomes.

In conclusion, the Win Ratio is a fantastic performance metric for analyzing your system, signal, or trading.

Stock Chart Learning

TrendSpider Discount Code

TrendSpider Coupon Code / Discount (Quick Answer)

TrendSpider Coupon Code

What TrendSpider Does (Best Features)

Who TrendSpider Is Best For

TrendSpider Use Cases on This Site

TrendSpider Video Demo

FAQ

Is there a TrendSpider coupon code?

Is TrendSpider good for beginners?

What’s the best feature if I only use one thing?

Which plan should I pick?

How To Create A Winning Trading System

How Do You Create a Winning Trading System? (Quick Answer)

Backtesting Tools (What I Use)

Step-by-Step: How to Backtest a Stock Trading System

A Simple Starter System (5/10 EMA Crossover)

How to Evaluate a Backtest (What Actually Matters)

Iterating: Improving the System With a Second Signal

Common Backtesting Mistakes (That Ruin Results)

FAQ

What symbols should I test first?

How much history should I use?

Can you beat buy & hold?

Conclusion

How to Master Meme Stock Trading (Satire Guide)

Master Meme Stock Trading (Satire): 9 Tips to Go Broke Faster

The Correct Monitor Setup (Required for Profit)

9 Tips to Master Meme Stock Trading

Real Resources (Not a Joke)

Stop Trading Options! You Are Being Scammed!

Stop Trading Options (Quick Summary)

Why Trading Options Is a Losing Game (Especially for Retail Traders)

The Options Trading Service Scam

Why Options Are Structurally Difficult

Leverage Is a Double-Edged Sword

Front-Running & Liquidity Problems

If They Had an Edge… Why Sell It?

FAQ: Trading Options

Can you make money trading options?

Is selling options safer?

What should beginners do instead?

Conclusion

Complete Anti-Options Education (Read These Next)

What Is a Gamma Squeeze? How Options Hedging Drives Explosive Stock Moves

Gamma Squeeze (Quick Explanation)

What Is a Gamma Squeeze?

How It Works (Step-by-Step)

Why “Crossing Strikes” Can Matter

Reality Check: Gamma Squeezes Cut Both Ways

FAQ

Is a gamma squeeze the same as a short squeeze?

Why do market makers buy shares when calls are bought?

Can gamma squeezes happen on any stock?

Related Reading (Internal Links)

Conclusion

How To Exploit Chart Patterns to Make Money

How Chart Patterns Help Trade:

Using Stock Chart Patterns:

Reversal Chart Patterns

Using ChatGPT For Stock Trading: Ten Prompts for Traders

How to Use Artificial Intelligence For Stock Trading

Market Analysis

Historical Insights and Risk Management

Strategy and Decision Making

Technical Analysis and Earnings

Current Events and Market Impact

Conclusion

Understanding Market Indicators

Economic Data Role in Financial Markets

Types of Market Indicators

Key Economic Data to Watch

How To Use Market Indicators To Trade

Examples Using Market Indicators To Trade

Advanced Techniques for Trading Market Indicators

Mistakes Traders Make Using Market Indicators

Steps on How To Use Market Indicators To Trade

Tools for Analyzing Market Indicators

Frequently Asked Questions (FAQs)