One of my favorite day trading chart patterns to swing trade short term is the Symmetrical Triangle breakout.

The Symmetrical Triangle formation is sort of odd since it appears as if energy increases as the stock moves closer into the head of the formation then it abruptly does a breakout.

The anticipated target of the breakout move is equal to the distance the stock moved going into the chart pattern.

Nevertheless you should use the Symmetrical Triangle chart pattern in conjunction with other technical indicators like the MACD.

The MACD should have the signal and the divergence lines both trending higher.

For knowing the best time to sell after the breakout move, I choose to look at the Slow Stochastic. What I will take the time to do is fiddle with my Slow Stochastic settings for the stock or market I am trading. You should see the previous episode I did about the interactive gizmo I use to accomplish this in a few seconds. When you have the optimal settings for your trading style and that have given at the very least three correct buy and sell signals, you will have your exit mark.

Currently in the Market Vectors Steel ETF (SLX), the optimized Slow Stochastic settings are 4, 4, 2.

The plan is to buy as soon as the stock does a breakout, and exit out of the market on the Slow Stochastic cross of the %K and %D lines.

I dig this chart as well for a possible re-entry. We have had a picture perfect Fibonacci retracement of 38.2% after the Symmetrical Triangle breakout. The Slow Stochastic is back closer to oversold territory.

You have to watch out though because the 50 day moving average is below the 200 day moving average but the 50 has turned up.

On a basic level, I like steel and understand why it did a Symmetrical Triangle breakout. As the global economic recovery picks up pace, steel consumption will burst upward as economic activity spurs construction and the use of steel.

I understand we hear a lot about a double dip global recession but I just do not imagine that is very likely now after the second quarter 2010 earnings season. An estimated 60% to 70% of all companies reported an increase in earnings year over year.

Something else you should keep in mind is that fear sells and media groups know this. What headline do you think generates more interest, “Global Economic Recovery Slows But Continues” or “Fed Closes 5 More Banks, Teeters On Global Collapse”? Everybody wants to know the spooky and scary facts of such an astonishing, attention grabbing headline. The first headline is just, yawn, well, right, yippe ki-yay and let’s all hold hands and sing Kum bay ya, my Lord, kum bay ya.

You also are going into the November 2010 elections so you have Republicans and their bogus Fox News attempting to talk down the economy and certainly who do not want an economic recovery before November.

Then you have your gold insects which usually are Republicans, and who have a big financial interest at stake in the U.S. dollar falling and other gloom and catastrophic economic stats. The plan being they do not want an economic upturn as they want everybody petrified and running out buying gold.

Lastly, you have media groups like Fox News bringing together both Republican politics of attempting to stop an economic recovery before November, and gold bugs by combining the commonly shared interests of the two. That’s why you had Glenn Beck, Bill Oreilly and a few others taking money from gold companies like Gold Line.

Being a technical analyst, occasionally you see things that you question why have more traders not seen or carefully considered this?

For example, Fed Ex.

Fed Ex is a fantastic future price prophet for the S&P 500 and really the whole U.S. economy.

On October of 2007, Fed Ex dropped and broke underneath the S&P 500. That move down led the S&P 500 by 2 months. In other terms, Fed Ex predicted the nose-dive in the S&P 500 by 7 weeks.

In this video, I study 8 years worth of data on both Fed Ex and the S&P 500 to show you the inter-market relationship between both of these stock charts.

The stock charts demonstrate that when Fed Ex is above the S&P 500 and leading higher, it gives a very bullish signal not only for the S&P 500 but the entire U.S. economy. While the S&P 500 is above Fed Ex and Fed Ex is leading lower, this provides a extremely bearish signal for markets.

Looking at June of 2009, Fed Ex started leading the S&P 500 higher. Something that is really interesting is that when Fed Ex leads the S&P 500 by an adequate amount to make a big gap, it is even more bullish for the stock market. So you can measure the gap between Fed Ex and the S&P 500 to calculate bullish outlook of investors in addition to current health of the U.S. economy.

The gap between Fed Ex and the S&P 500 lessened at the first part of April 2010 before the Euro crisis hit mainstream news and the S&P 500 fell 3 weeks later.

Studying June of 2010, once again, Fed Ex started to gap ahead of the S&P 500 and that big gap still exists on today’s chart. This wide gap forecasts an upward future price move for the S&P 500 in short order.

On July 26 2010 Fed Ex raised its earnings outlook for the fiscal first quarter and remainder of the year, with the transport monster telling us express and ground volumes have been higher than projected.

The basis for why Fed Ex is a great future price forecaster of the S&P 500 and in fact the entire U.S. economy should be evident. When business and industry improves, shipments explode. For you Dow Transports theorists, Fed Ex is what trains were to the U.S. economy many years ago. Obviously we do not use trains like we use to anymore but instead shipping businesses like Fed Ex.

A good example of how Fed Ex is mixed up in most things can even be applied to a diverse sector such as property management. As banks start to release credit and apartment complexes start to sell, property management services are required. Mortgage payments need to be made when sufficient rents are collected. The mortgage payments are then paid by checks via overnight Fed Ex. This is merely one case of how interrelated our economy is and how no matter how diverse a business is, it is linked to Fed Ex somehow.

Can I still be a millionaire day trader by the time I’m 50?

At the time I first started stock trading in 1994, I started in mutual funds. I did not have much. I kept putting in a tiny bit of money each month from my day job to my stock trading account and when I had enough, I would purchase more of the same large funds. I brought my trading account up to $10,000 which was also the bulk of my entire net worth.

I got tired of the little gains each year from my mutual funds and then Janus was busted by the SEC for permitting their favored patrons to trade in and out of their funds while small dudes like myself had to buy and hold.

I started looking at penny stocks and greediness filled my brain with how much I would make quickly if I went long the right one.

I was innocent, susceptible white meat for the next sly penny stock scam that came along.

I invested $1,000 in a pink sheet stock called Plasticon. I discovered this stock from Investor Business Daily. The periodical looked trustworthy. Afterward College Stocks profiled Plasticon, and last Green Light. Truly this was the next sizzling penny stock.

I was youthful. Everything published about this pink sheet company was a fib. The CEO Jim Turek even went on Investors Business Daily streaming video news show and lied. I remember telling my wife he looked honest and she agreed.

Subsequent to my initial $1,000 invested, the stock fell 50%. Hence what did I do? Why double down of course. I purchased an added $2,000 worth of stock.

Then Yahoo Finance published the news story that Plasticon was filing for a listing to the OTCBB. This stock is a show jumper I thought! Therefore I researched the subject of stocks that went from the pink sheets to the OTCBB and found that some did really well after uplisting. Consequently what did I do? Well I bought $1,000 more of Plasticon as any decent penny stock investor would do.

The stock fell an additional 50%. I was a little nervous. But then a news story came out that Plasticon had just signed with a major distributor to sell their plastic re-bar supports! This could be like Tazer I imagined. A small penny stock supplying product to a major distributor means wild pay-day profits! I bought an additional $2,000 on the news.

The stock fell an additional 50%. I was becoming very nervous now. But suddenly, like a reward from God (I used religion in my stock trading back in those dumb days), James Turek announced that Plasticon was not going to file for an OTCBB listing, oh no, they changed their mind and were going to file for a listing to the AMEX. Hence what did I do? Well if I thought that an uplisting to the OTCBB was worth $1,000, then surely an uplisting to the AMEX was worth $2,000. Therefore I purchased $2,000 more!

All this occurred over a 3 year period until finally, the penny stock fell under $0.001 and Plasticon filed for bankruptcy.

There are so many errors that I made along the way to losing everything. Clearly I was quite despondent about how much I had lost. What made it all the more depressing was that it was my entire life savings. That money was everything to me. It was all my hopes and ideas, especially when you compound this amount at some 4% or 5% for maybe 40 to 50 years ahead of me. I sat down long and hard, reviewed all of my mistakes, and attempted to understand my stock trading and investing lessons. My wife asked why I was doing it at all, waking up at 6:00am PST for so many mornings to trade stocks, reading hundreds of books about investing, and yet I had zilch to show for it, but a gigantic hole in the pocket and heart. It was a great question, and I had an uncommon answer.

My own response was “I prefer to lose it all now in my thirties, rather than losing it all in my fifties. If I be taught my lessons early, I would not make the same big mistakes much later. Nowadays, I am stock trading and investing some $15,000. One day, I hope to be managing and investing one million dollars. I can afford to lose $10,000 in my thirties, but I won’t be able to afford to lose even 20% of a million dollars when I’m older.” Sure, I was in pain from my unfathomable loss. But I was so unwavering in continuing my stock trading and investing, and I was sure that one day I would be managing a much larger amount. Because I knew I would be investing for the next 30 years or more, the earlier I learned how to do it the better.

Each one of my past investing and stock trading errors has continued to help me to become a better investor and smarter trader. My big loss of everything in my early thirties has made me a much more careful and knowledgeable investor. He who has grabbed a bull by its tail knows twice as much as he who never has. I realized some of the lessons you can never learn from books. All the real crucial lessons must be learned from agonizing errors.

Below is a video of some of the painful lessons I learned.

I have received tons of attention on my pair strategy article and the position I entered in both Apple and Research In Motion. I went long Apple and short Research In Motion.

The approach of matching a long position with a short position in two stocks of the same sector is called pair trading. This forms a hedge against the sector and the overall market that the two stocks are trading in. The hedge created is essentially a wager that you are placing on the two stocks; the stock you are long in against the stock you are short in.

As its name implies, a pair trading approach is a double-pronged strategy, where 2 seemingly unrelated option or stock trades are opened at the same time. The method can give somewhat of a safety net to guard against an unanticipated move in a specific sector, while capitalizing on a specific equity’s relative-strength backdrop.

Fundamentally, a pair trader hedges his or her bets, opening positions in two interrelated equities or indexes and playing them against one another, choosing 1 call (bullish) position and 1 put (bearish) position. The pair of positions then together enables profitable returns among a number of outcomes.

For example, I had a great view regarding Apple, but a pessimistic sentiment about Research In Motion. I went long on Apple at the same time as I shorted Research In Motion.

I also had an uneasy feeling concerning the whole technology sector. Through taking a short position in Research In Motion, it allowed me to profit if a large sell off in tech took place. This profit on the short side would counteract my losses in Apple on the long side.

Apple maintained its relative strength versus Research In Motion. The shares rallied and the short side of the trade (Research In Motion) dropped. Both sides of the paired trade entered positive territory.

However let’s say the whole technology sector suffers a large decline. The Research In Motion short is profitable, counter-acting the Apple long position which nets a loss. This is a superior outcome than if I merely went long on Apple.

You are looking for the percentage change in the market between Apple and Research In Motion to move in Apple’s favor no matter which direction Apple or Research In Motion head.

On May 14, 2009, I went long Apple at 122, and short Research In Motion at 71. I closed out the pair on July 10th 2009 with Apple at 137 and Research In Motion at 66. I made 12% on my Apple long, and 7% on my Research In Motion short. So the total gain was 19%.

Conceivably the most popular intraday stock trading technique practiced by skilled stock traders is the Opening Range Breakout. Since its conception, the Opening Range Breakout has evolved into a number of various strategies.

We are going to define the Opening Range as the initial 30 minutes of trading. At the thirty minute mark, we can draw a line on our chart or make a mental note of the highest price and lowest price during this time frame. So the fundamental foundation of defining the Opening Range is that the predisposition for trading the underlying stock will be determined by where the stock is trading relative to the Opening Range.

As long as the stock or market trades within the Opening Range, it is trend impartial and does not give either a buy or sell signal.

Provided the stock breaks above the high of the Opening Range do not do a thing yet. You must have a close above this range on a 5 minute chart.

Provided you get a 5 minute candle breaking above the Opening Range, the next signal you need is verification. You must have one more 5 minute bar closing above the range to prove the breakout.

If the stock crosses below the low of the Opening Range, do not do a thing. You must have a 5 minute candle crossing below and you must have an additional candlestick for confirmation just like a break over.

Any stock trading above its opening range has a bullish prejudice, and a stock trading below its opening range has a bearish bias provided it meets the extra necessities talked about above.

Keep in mind that the trend is your friend. Breakouts that transpire in the direction of the larger trend have a greater success rate. So make sure that you determine the larger trend first.

Consider volume as market emotion. Greater than average volume increases the potential for the breakout to go on in your favor. A lack of volume will decrease the expected profitability of the trade.

In this episode, I didn’t want to simply show you an ideal session. I took the last trading day prior to doing the video. I also sought to include actual market data on SPY instead of just showing you a static diagram or stock chart.

Looking back in time at a chart with price movement in the middle of the chart is always easy to guess. The actual challenge is the closer you get to the right of the stock chart in terms of truly predicting future price direction. Thus in the video, I deal with the chart as far to the right as we are able to go to reproduce what this strategy looks like in real time as you trade all through the day.

Brought into this world by way of George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum guide that shows the position of the current close relative to the high/low range over a specific number of periods.

George Lane M.D. (1921 to 2004) was a Doctor of Medicine, securities trader, author, educator, and technical analyst. He made and hyped the Stochastic Oscillator, which is one of the fundamental technical indicators used in the present day among technical analysts.

Word on the street from an interview with Lane, the Stochastic Oscillator doesn’t follow price, it doesn’t follow volume or whatever thing like that. It follows the speed or the momentum of price. As a law, the momentum changes direction before price. Thus, the Stochastic Oscillator can be used to identify bullish and bearish divergences to foreshadow reversals.

I prefer to trade the Slow Stochastic for the reason that it is more smoothed out than the Fast Stochastic giving less head fakes.

A discrepancy between Fast Stochastics and Slow Stochastics is only a moving average. When working with the Fast Stochastics using the values of 5 and 5, the first 5 is the raw value for Stochastics, while the second 5 is a 5-period moving average of the first 5. When using Slow Stochastics, the first two 5′s are the same as with the Fast Stochastics, with the third 5 being a moving average of the second 5. You are not having an LSD hallucination, that is correct, a moving average of a moving average. Don’t ponder that too much.

That slows down the movement of the indicator, consequently the name of Slow Stochastics. By slowing the movement of the indicator down, we will notice a smaller number of signals to buy or sell on the stock chart, but they ought to be more dependable signals to trade for profit.

Like you can check out in the illustration above, the Slow Stochastic provides fewer buy and sell signals but they are more correct.

The settings I like to use for the Slow Stochastics depends on the market or stock I am looking at. I constantly get a laugh out of investors which try and use a one size fits all method. I say use the potential of present day computers and network with people like the # 3 ranked trader out of 10,480 traders.

Moreover keep the kind of Stochastic signal you are planning to either buy or sell as adaptable also. For instance, you may find that the signal line breaking above the 20 line is a good buy indicator, where a good sell indicator is the signal line breaking below the %D line. You may possibly see that for the market you are in that a cross of the signal line and the %D line is a better buy signal while a sound sell signal is at the time the signal line extends above 80 for a day or two and then breaks under the 80 line. You may perhaps uncover that bullish divergences are better trade signals for particular stocks and markets. For example, go long when the stock price makes a good low but the Stochastic draws a shallower low.

Bear in mind, every stock and market has its own personality at different times of the year because that personality is a likeness of the combined human psychology of all the stock traders who are trading that exact market at a specific time of year. Learn to modify your Stochastic to the market you are trading and to your own trading style, and watch the profits start to pour in.

This beautiful chart on Total System Services (TSS) says it all. Bought right before market close today.

Your search on information on the topic of avoiding losses in trading says to me that your brain is in the correct place. A large amount of newbie stock traders concentrate on greediness or the reverse of risk aversion. Amateurs imagine how much money they can make if their stock goes up to xx, and not about how they can lessen stock trading losses.

Can you avoid losses in stock trading? Nix that idea. My own 10 year accuracy rate varies between 70% and 80%. In other words, 20% to 30% of my positions result in losses. However, there are steps you can take to shrink losses when stock trading.

1 – Don’t try and earn back your losses. The most awful action you can do after a loss in stock trading is to make a decision that on your next trade you will make back the loss. Lots of amateur traders will put on a riskier stock trade in a penny stock or any stock they think can appreciate in value even greater than their original losing stock trade with the plan that they will make back the money they lost. Do not do this. Getting in a riskier trade suggests you now amplified your chances of having a second losing trade. Do not get gluttonous and lose all awareness of fear because of a loss. Instead look at your stock trading method. Did you hold to your stop loss strategy? Did you rationalize and give reason for why you were continuing to hold the losing stock even while your original profit thesis was broken? Make any adjustments you need to your stock trading method then move on.

2 – Hold to your stock trading method. Quit jumping around from stock trading method to trading system when you incur a loss. No stock trading system is flawless. Continue with your stock trading system and make changes as desired but don’t hop from trading system to trading system. Get very good at a trading system before you make your mind up to machete it. As well, don’t become frightened and be exceedingly conservative.

3 – Determine the trend of the most important indices. Use either the S&P 500 or the Nasdaq and determine the trend prior to buying or shorting a stock. The idea is to trade with the trend, not counter to it.

4 – Determine your profit thesis before you enter the stock trade. The profit thesis must include what percentage profit you will have before you sell, and what percentage loss you will have before your sell. You must never risk more than you are attempting to profit. For example, in company ABC I am going for a 5% to 10% gain, with a 5% stop loss. Cut your losses quickly but allow your winning positions to ride.

5 – Enter your positions at a better level. I have found that when I go long a stock, if I’m up the same day of buying, my likelihood of it being a winning trade for me go way up. The entry is so vital that several famous traders have gone as far to say that they make their money on the entry, not on the sell.