Technical Analysis
Daily Routine

Based on the body of knowledge from the above techical analysis sections, this is the daily routine used to scan instruments for long and short entry signals.

Time Frame

For trading we will use a real time daily chart or a 4-hour chart with the last daily or 4-hour bar showing the real time last price. We use a daily or 4-hour chart so that the signals generated are appropriate for trades lasting more than one day. If we were to use a lower time frame (such as hourly) the signals would be more appropriate for a day trade than a swing trade.

See Time Frames and Signals page.

Procedure

Plot the Zig-Zag Indicator, Zig(5%). We do not generate signals from Zig, but it can help visualize trends, peaks and valleys, etc.

1) Draw trendlines between peaks and between valleys. Look for channels and support and resistance lines.

• If the Trend is Up and price Crosses Above a channel line (top or bottom) or a resistance or support line, generate a potential Long Entry
• If the Trend is Down and price Crosses Below a channel line (top or bottom) or a resistance or support line, generate a potential Short Entry

2) Plot Moving Averages with 15, 45 and 100 periods . Look for MA Crossovers. When a shorter term MA crosses above/below a longer term MA, this is bullish/bearish.

• If the Trend is Up and there is a Bullish MA Crossover, generate a potential Long Entry
• If the Trend is Down and there is a Bearish MA Crossover, generate a potential Short Entry

3) Plot MACD(12, 26) with 9 period Signal Line. When MACD crosses above/below the Signal line, this is a bullish/bearish sign.

• If the Trend is Up and there is a Bullish MACD Crossover, generate a potential Long Entry
• If the Trend is Down and there is a Bearish MACD Crossover, generate a potential Short Entry

4) Plot the Relative Strength Indicator, RSI(14). An RSI below 30 is considered oversold and is a bullish sign, while an RSI above 70 is cosidered overbought and is a bearish sign.

5) Plot the Average True Range, ATR(14). A contracting ATR shows lower volatility which is a positive sign to take a trade, but the doesn’t show which direction to take (long or short).

6) Scan for Price Action Setups

7) Scan for Chart Pattern Breakouts.

8) Scan for Candlestick Entry Signals.

For Technical Analysis to trigger a trade, we want:

• A friendly Trend
• Good Technical Indicators
• One of these to trigger an entry:
  • Price Action Setup
  • Chart Pattern Breakout
  • Candlestick Pattern

Note that technical indicators by themself can’t trigger an entry.