A Guide to Technical Indicators – Moving Averages

August 31st, 2015 by VantagePoint Software

technical indicators

Newbie traders and even seasoned investors with a fundamental bias often become overwhelmed by the technicals. But before you develop “analysis paralysis” it’s important to remember that most technical indicators are neither too complex nor too sophisticated for the average retail trader to use.  Watch this short video for an overview of the indicators available in VantagePoint.

Market Analysis Tools – What is an Indicator?

Let’s begin by clarifying what an indicator is and is not. It is a calculation plotted on or below price action on a chart. This provides an alternate view for interpreting market moves, a view that might not be as obvious when looking at price movement alone. Indicators are used in two main ways: to confirm price movement and the quality of chart patterns, and to form buy and sell signals.  An indicator does not involve random estimations or judgments.
What is a Moving Average – Chart Analysis Basics 

Moving averages (MAs) are one of the most popular and widely used technical indicators. Moving averages smooth the price data to form a trend following indicator. They do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices. Despite this lag, moving averages help smooth price action and filter out the noise. They also form the building blocks for many other technical indicators and overlays, such as Bollinger Bands and the MACD.

The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). These moving averages can be used to identify the direction of the trend or define potential support and resistance levels. 

Simple Moving Averages

A SMA is figured using the closing prices for a specified period, such as 6 days.  If prices are closing lower, the SMA points down. If prices are closing higher, the SMA points up. Plotting this average on a chart could make it much easier to identify market direction and spot trends, compared to a chart that just shows the open, high, low and close of the price chart’s time frame. 

You don’t need complex math to compute a SMA. Actually, they are very simple to figure. Let’s say one is trying to calculate the 6-day moving average of closing prices. Add up the last 6 days and divide the total by 6 to determine the moving average.

The average “moves” because every day the oldest day is dropped off as the current day’s information is added.

Simple Moving Average

While the math is seemingly simple, this technical tool is widely available in all standard charting software packages. There will usually be a function to change the parameter of periods, such as a 20-day or 10-hour (depending on chart time frame) for the moving average.

Limitations of a Simple Moving Average

A criticism to the SMA concept is that each day’s action carries equal weight. In addition, because of the way it is constructed, the SMA trading signals are lagging, not leading, indicators. That means they are only using past data and have no predictive value as to what may happen in the future.
Because of this lagging effect and the desire for traders to have a leading indicator, VantagePoint’s team spent years researching and millions of dollars to create a Predicted Moving Average (PMA).

A 6-day PMA of closing prices takes the past four days of closes, adds two days of predicted data, and then divides that total by six.

predicted moving average

Six days are still averaged, but day five and day six are predicted. This minimizes, if not totally eliminates, the lag.

Exponential Moving Averages

Exponential moving averages (EMAs) are similar to SMAs except that more weight is given to the latest data. The weighting applied to the most recent price depends on the number of periods in the moving average. There are three steps to calculating an exponential moving average. First, calculate the simple moving average. An exponential moving average (EMA) has to start somewhere so a simple moving average is used as the previous period’s EMA in the first calculation. Second, calculate the weighting multiplier. Third, calculate the exponential moving average.

The formula below is for a 10-day EMA

SMA: 10 period sum / 10

Multiplier: (2 / (Time periods + 1) ) = (2 / (10 + 1) ) = 0.1818 (18.18%)

EMA: {Close – EMA(previous day)} x multiplier + EMA(previous day).

A 10-period exponential moving average applies an 18.18% weighting to the most recent price. A 10-period EMA can also be called an 18.18% EMA. A 20-period EMA applies a 9.52% weighing to the most recent price (2/(20+1) = .0952). Notice that the weighting for the shorter time period is more than the weighting for the longer time period. In fact, the weighting drops by half every time the moving average period doubles.

Still, even with the weighting of the EMA, it is still a lagging indicator. Only technical tools like VantagePoint Trading Software’s PMA are leading indicators that predict market behavior.

Moving averages can be a useful tool for those looking to identify what type of trend the market is in and when a turning point has occurred.

Again, traders will never catch exact tops or bottoms with moving averages, as they are lagging indicators. However, an indicator like VantagePoint’s Predicted Moving Average can take your technical analysis to a whole different level and literally put you days ahead of other traders.

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How High Frequency Trading Impact your Risk Management Techniques

August 28th, 2015 by VantagePoint Software

Risk Management Techniques

Back in February the Chicago Mercantile Exchange announced that they are closing the majority of the trading floors. Open outcry, where floor traders in colorful jackets shouted prices of everything from lean hogs to financial instruments, has been waning since electronic trading was introduced in 1992. Given the advancements in technology, this decision wasn’t a huge shocker. The speed at which computer servers can match buyers and sellers has created a new paradigm of efficient markets. However, it’s important for traders to consider the impact this has on their risk management techniques.

So, how can retail traders alter their trading and risk management style for this new electronic world?

The Rule of High Frequency Trading

Certain trading plays are less effective now that there is no open outcry and the landscape is dominated by the High Frequency Traders (HFT) in the electronic age.

HFT is trading for which success depends critically on low-latency communications and decision making. High-frequency traders use computers to process electronic data feeds, make trading decisions and convey orders to electronic exchanges over intervals measured in micro- and milliseconds. HFT has grown with the electronic exchanges that enable it. Considering the all electronic environment, here are some factors to consider:

  • Re-think your ideas on stops– You many need to be more dynamic in the way you place them and use a chess like mentality to think a number of steps ahead.
  • Stick to high volume stocks– It is still pretty hard for HFT’s to manipulate the movements of highly liquid stocks like  AAPL or MSFT as well as many widely followed ETF’s.  Keep in mind that the higher the volume and tighter the spread, the less susceptible a stock is to mechanical machinations.
  • Take a longer time frame– HFT’s can only affect price in the short-term.  As you go towards longer time frames, like in swing trading, you can almost completely eliminate their influence.
  • Get a jump on the markets – To anticipate a trend change, use predictive trading software like VantagePoint Trading Software. The predictive indicators tell you where the market trends are going, unlike lagging indicators which can only tell you where the trends have been and that they’ve already turned and changed direction. To be able to get on board a trend early, you’ve got to be able to anticipate instead of react to trend changes.

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The Global Stock Market Crash Was Predictable

August 26th, 2015 by VantagePoint Software

global market crash

It’s been quite a week in the markets. Are you feeling the effects of the global stock market crash in your 401k? Chances are, like most traders, you didn’t know what was coming until it happened. OUCH.

I can only imaging the level of frustration and heartache that must cause.

It seems “global markets” is the buzzword on just about every trading website and news station these days but the truth is, this concept is nothing new. Lou Mendelsohn, the founder of Market Technologies, has been preaching this approach since the 1970’s. That’s why he developed VantagePoint to help traders get ahead.

This software constantly analyzes global market relationships to produce trend forecasts that are up to 86% accurate. What does that mean?

It means this software knew the global stock market crash was coming.

WHAT?

That’s right – not only did the users of this software know that the U.S. markets were about to tank, but they actually had the opportunity to make money because of it! Check out the video below to see exactly how….

On July 27th VantagePoint Software forecasted the S&P 500 to start trending downwards. With that kind of information, traders could have taken position the next day and, as a result, would be up $10,538 per contract. Incredible right?

On July 24th VantagePoint Software forecasted the DOW to start trending downwards. With that kind of information, traders could have taken position the next day and, as a result, would be up $8,975 per contract.

Want to make sure you’re never got off guard again? Give us a call today to find out how you can get your hands on these powerful forecasts. The next 50 callers will receive $5700 worth of forecasts for the DOW, S&P and NASDAQ for free.

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How to Make Money When the Stock Market Goes Down

August 20th, 2015 by VantagePoint Software

stock market goes down

Do you ever wake up, turn on the news, find out the market is suffering and think to yourself “great, how am I supposed to make money today?” Don’t worry, you’re not alone. Many traders get caught up in the big picture and it causes them to miss the hidden gems found in individual trading opportunities. We’ll show you how VantagePoint helps traders make money when the stock market goes down.

While most traders are stuck in the present moment, worrying about what the market is doing, VantagePoint users rely on the predictive technology that forecasts what the market is going to do. Therefore, they know that what matters most has yet to happen. They have information in their hands about what is going to happen in the market in the next one to three days. This advanced notice gives them imminent information so they can set effective entry and exit points. In the video below you will see 6 recent examples where this technology could have paid off big time.

In addition to having incredibly accurate forecasts at their fingertips, VantagePoint users benefit from the Intelliscan feature which quickly scans through thousands of markets to identify only those that meet their current needs. In the screenshot below you will see that we took the stocks from the video above and plugged them into Intelliscan where we can quickly identify the last crossover date, direction of the trend and receive confirmation from the Predicted Neural Index. Here, we can see the recent crossovers in both Netflix and Eli Lilly that were identified as trend reversals the night before they shifted gear using VantagePoint’s end of day updates.

Intelliscan in VantagePoint

While the software itself may be using advanced Intermarket Analysis coupled with Neural Network technology, it really doesn’t take rocket science to realize that these powerful forecasts produce more profits for the individual trader. If you’re ready to make more money, regardless of the market’s overall performance, then it’s time to act.

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How to Analyze Chart Patterns

August 17th, 2015 by VantagePoint Software

chart

It’s all in the charts. Charts don’t lie. Charts make smarts….We’ve heard all the utterances. And while your chart may be your best friend, the chart alone can’t make you money. What a chart can do is provide specific patterns to elucidate market trends – but first you must know how to analyze chart patterns to make sense of the data.

So where do you start? In the technical analysis milieu, chart patterns abound – flags, hammers, heads, shoulders, cups, saucers and more. While they can all reveal market trends, these two broad categories are widely used and can help you learn whether a trend is just beginning or about to end.

Continuation Patterns

A trend in motion tends to stay in motion, according to a rule of physics. In market language, trends tend to persist or at least move into a sideways pattern until a new force comes along to change it. But a market seldom goes straight up or straight down for an extended time. There are always periods when it has to catch its breath or reevaluate where it’s heading as traders adjust their thinking to new price levels. In general, these periods look like pauses or congestion areas in an ongoing trend on a chart. Often, after a relatively brief period of reflection, a market will break out of this congestion area in the same direction as the trend was going.

The flag is one of the most common continuation patterns. After breaking above previous highs and moving into an uptrend on the chart below, the market seems to need a little time to digest its new price plateau.

chart patterns - continuation

Prices set back for a few days before breaking out to the upside to resume the uptrend. Bullish flags like this may occur several times in an uptrend.

Both bullish and bearish flags can occur, as well as bearish and bullish triangle and wedges, two of the other common continuation patterns.

Reversal Patterns

While a continuation pattern suggests that a trend in place will continue in the same direction after a brief pause, a failed continuation pattern may well turn into a reversal pattern. Like their name implies, reversal patterns suggest that one trend is ending and the market is ready to begin another trend in the opposite direction or, perhaps more likely, to move sideways for a while.

As with continuation patterns, a trend line or key support or resistance areas are points to watch. If prices rebound from these areas, a continuation pattern remains intact. If prices break through a trend line or triangle boundary and then follow through with the breakout, this is the best evidence of a trend reversal.

Some of the main reversal patterns include:

  • double tops and double bottoms
  • M tops and W bottoms
  • head-and-shoulders formation
  • rounding bottom
  • Cup-and-Saucer and diamonds.

How to Make Chart Patterns Work for Your Trading

Chart patterns provide clues about possible price direction but do not predict what prices will do. Their main value often comes from honing in on the price action to identify price parameters and points where a trader may want to take action.

Once you know how to analyze chart patterns – imagine that you could combine what the patterns reveal about market trends with a tool that actually predicts what prices will do?

VantagePoint Trading Software gives traders an advanced notice of changes in the markets. The scientifically proven technology uses patented, predictive indicators to forecast future price trends with up to 86% accuracy. Instead of being restricted to relying on what chart patterns tell you about past market movement, VantagePoint predicts what the market is likely to do 1-3 days in advanced. By combining the power of VantagePoint with simple pattern analysis you can have true chart smarts.

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How to Know When the Stock Market Will Turn

August 13th, 2015 by VantagePoint Software

Whether you’re a bullish or bearish trader there’s really only one thing that every trader wants and needs to know in order to be profitable.

stock-market-turn

When will the stock market turn?

The key to understanding when the stock market will turn is having an effective, consistent method for identifying the onset of a trend reversal. A simple moving average will analyze past data but will lag the market, making it very difficult to get ahead.

VantagePoint transforms traditional moving averages into predictive, market leading indicators. By using a combination of past price data and predictive technology, our indicators give advanced notice 1-3 days ahead of a trend change. This gives traders a highly accurate forecast of when the stock market will turn, allowing them to get into position sooner and capitalize on trend changes that would have been missed.

In the video below we show you two examples of recent market moves where the predictive moving average in VantagePoint indicated that the market was going to turn. Following these indicators put traders in positions, both bearish and bullish, to make substantial profits in a short period of time. (Hint: this also includes the monster move we saw in $GOOGL on Monday.)

The technology found in VantagePoint has been tested and proven for three decades and has transformed the lives of literally thousands of traders. If you want to get ahead in the markets you need the right tools to help you accurately predict major game changing moves like these.

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How to Predict the Stock Market with Trend Forecasting Software

August 7th, 2015 by VantagePoint Software

Using the George S. Patton Method to Predict the Stock Market

“Lead me, follow me, or get out of my way.”

george s patton

It’s almost as if this iconic quote from General George S. Patton Jr. was speaking directly to different stock trading strategies, specifically trend trading. Trend trading is often seen as reactive and systematic by nature.  The word “follow” is inexorably intertwined to this method (trend following) as most strategies involve joining the trend after it’s started. These words might as well represent 3 totally different trading strategies. We’ll examine each and let you know how you can apply one of them in order to better predict the stock market and make profitable trades.

“Follow Me” – Reactive Stock Trading

Herein lies the problem of trend following stocks. All too often, traders are too late to the party and miss the bulk of the move. Did you miss the recent trending moves in Starbucks ($SBUX), Google ($GOOG$) or Netflix ($NFLX)?

Many traders did because they are using the “follow me” approach that involves lagging indicators. Their stock predictions are reactive – they study a chart on Tuesday night, look at a moving average and see that a particular stock they follow has been trending up or down. Because they are dealing with lagging indicators that involve past price history for that stock, they enter the trend too late and miss the “meat” of the move.

“Get out of my way” – Trading from the Sidelines

Upon further inspection of that same stock, followers find that the trend actually started a week ago and they are too paralyzed to enter the trade. They will inevitably take the “get out of my way” route. Their stock predictions were directionally correct but their entry timing was off, so they inevitably missed a profitable trading opportunity out of fear that the trend is over.

It’s easy to see that there’s no way to get ahead of the market if you are constantly playing catch up or sitting on the sidelines. Instead, let’s look at ways to predict the stock market using trend forecasting technology.

What if you could approach your stock trading from a “lead me” perspective?

“Lead me”- Trend Forecasting Stocks

Traders who have accurate information ahead of the market can enter and exit positions before major trend reversals with a high level of confidence. VantagePoint is a trend forecasting software that uses predictive indications to give traders a look into a stock’s future. Through global market analysis and neural network technology, VantagePoint software transforms market lagging indicators in market leading indicators that anticipate trend changes and forecast the short term future trend direction, market strength and daily trading ranges days in advance.

In order to adapt the “lead me” style, and get on board a trend early, you’ve got to be able to anticipate, instead of react, to trend changes.  Frequently, VantagePoint’s predictive indicators will flash an “early warning” – that a stock’s trend is about to change direction before it actually happens. This is the edge that traders truly need to preserve capital and grow wealth in today’s volatile markets.

market lagging indicator

predict the stock market

Are you ready to adapt the George S Patton method and become a “lead me” type of trader who can predict the stock market?

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How To Make Money With VantagePoint

August 5th, 2015 by VantagePoint Software

making money trading in the markets

The first thought many traders have before investing in a new tool is – How easily can I make money trading with this? A return on your investment is important, which is why the team at Market Technologies has invested millions of dollars and over 3 decades of research, development and support in order to provide traders with the absolute best in market forecasting software. In the video below we’ll demonstrate how traders can make money trading with VantagePoint right off the bat.

VantagePoint’s accurate market forecasts allow traders to feel confident about finding the right trades and staying out of choppy sideways markets. Once a trading opportunity is identified, VantagePoint will help traders manage their positions with the predicted moving average, the next day’s predicted trading range and the predicted neural index.

Forecasts for those looking to make money trading now

In this video you’ll see forecasts for the following:

EnCana ($ECA) decreased 47.94% or $6.76 per share in the last 60 days. 1000 shares of this stock would have made you over $6000 in just 1 trade to the downside.

Skechers ($SKX) increased another 23% in the last 5 days. It’s now up 105.67% in the last 74 days. It’s easy to see how to make money with VantagePoint simply by following the indicators.

We also take a look at some long positions in Gold and Light Sweet Crude Oil for those who are trading commodities.

Ready to make money trading?

Regardless of what asset classes you are currently trading, VantagePoint’s market forecasts, proven to be up to 86% accurate, can help investors of all levels make money trading in the market. With increased confidence and consistency, profits will surely follow. an absolutely obtainable goal. Want to see a forecast for another stock? Leave a comment below and we’ll be sure to follow up with you.

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