Successful investing and stock trading is a marathon, not a sprint. The tools you are equipped with are your shoes. In order to win the race, you have to know how to adapt and optimize your running.
Consistent wins in stock trading can be tricky. One day you may make $1,000 and the next day, zero.
The question is: what is your favorite, but least talked about, technical or fundamental analysis tool?
For this reason alone, you need expert guidance. That is why I scoured the Internet to find the top traders and investment industry influencers willing to share their stock trading tricks.
We wanted to learn their #1 stock trading tools.
Some of these top traders have also included a link back to their web site of choice where you can further your learning on the topic. That is like hitting two birds with one stone.
Talking with the most influential traders in the investing industry, a common pattern emerged. Each trader, while choosing a different indicator or tool, revealed deep insight into the use of that indicator that went way beyond your typical textbook or Wikipedia description of that tool. My own take away was that there are many ways to make money at trading and no one indicator is THE best indicator. However, if you want to be on top of your game like these folks, get REALLY good at using just a few indicators. Master them. Don’t jump around from indicator to indicator like a flying squirrel. Pick only a few indicators and then master them.
Before we start off with the answers, I want to THANK in advance all participants. Getting to talk with the top influencers in the investing industry has been a wonderful experience.
Enjoy everyone and good luck!
Kirk Du Plessis – OptionAlpha.com
Kirk Du Plessis Favorite Stock Trading Tool Kirk Du Plessis is a full-time options trader, real estate investor, stay-at-home Dad, and personal coach. He was recently featured in Barron’s Magazine as a contributor to their Annual Broker’s Review and is the Founder and Head Trader at Option Alpha.
Kirk Du Plessis likes to use the highest probability indicator over the long run. Kirk says that, based on research of more than 15 years of technical analysis signals, the RSI is the only indicator that has actually been proven to work consistently. “I like to set the RSI to a 14 day time frame and with signal levels at 80 for over-bought, and 20 for over-sold. For me, I would rather have something that works long-term as opposed to something I ‘like’ to use or looks ‘cool’ on a chart”.
Tim Knight – SlopeOfHope.com
Tim Knight’s Favorite Stock Trading ToolTim Knight founded Prophet (which created ProphetCharts and the Investools Investor Toolbox) which is now owned by TD Ameritrade. Tim Knight has written the Slope of Hope technical analysis blog for over ten years.
Tim Knight uses Fibonacci retracements, but with a twist. He looks for “Fibonacci Friendly” markets to trade. Mr. Knight says, “I hardly ever see these used, but on certain indexes and stocks, they are almost like magic. The chart has to be what I call “Fibonacci Friendly”, that is, historically, it should have a larger number of support and resistance turning points at the Fibonacci levels”.
Clay Trader – ClayTrader.com
One of ClayTrader’s favorite tools is volume. Clay believes that volume is “the indicator that hides in plain sight”. Clay says, “A chart, including the price action itself, is absolutely nothing without volume. Sure, a chart can have great ‘price movement’, but if it is a situation where selling your shares is going to be difficult due to lack of volume, then who really cares ‘what’ the price is doing. Volume also influences all the other technical indicators. Without liquid volume, various other indicators can become very jumpy and sporadic, and therefore unreliable. Bottom line, it all starts with volume. Not the most fancy sounding indicator by any means, but the most influential”.
Rick Ackerman – RickAckerman.com
Rick Ackerman’s Favorite Stock Trading ToolsRick Ackerman has been trading for nearly 40 years, twelve of them as a market maker on the Pacific Stock Exchange. Mr. Ackerman is a blogger and currently publishes Rick’s Picks, a daily web-based service.
Rick Ackerman’s favorite tool is discipline, and he enforces that discipline with price and pivot levels. Mr. Ackerman says, “I use my own pivot system, a very simple pattern-recognition tool that I have honed and refined over twenty years. It is entirely price-based, and so the charts I use contain no oscillators, trendlines, Fibonaccis, support/resistance lines or even volume bars. However, ANY method that imposes discipline on one’s observations of the markets each day will eventually pay off”.
Ivan Hoff – IvanHoff.com
Ivan Hoff focuses mainly on price. Ivan’s approach is similar to Rick Ackerman’s but instead of the main focus being price pivot levels, it is price action. Ivan says, “My favorite technical indicator is price action. Everything else is derived from it”.
John Welsh – JohnWelshTrades.net
John Welsh says, “Three things I hate in life: the pump, the sell, the phony”.
John Welsh focuses on fundamental tools in his trading and he uses a combination of social sharing and news intelligence gathering services. Mr. Welsh says, “The fundamental tools I use for daytrading and to see what is moving are: Stocktwits and Twitter for trending stocks, and Tradethenews.com”. Mr. Welsh also uses Yahoo Finance to get the fundamental financial data metrics of a particular stock.
Bill Luby – VixAndMore.blogspot.com
Bill Luby’s Favorite Investing ToolsBill Luby is the Chief Investment Officer of Luby Asset Management LLC, an investment management firm that specializes in VIX products, volatility derivatives and liquid alternative investments. Bill Luby publishes the VIX and More blog, co-founded Expiring Monthly: The Options Trader’s Journal, and is a recurring guest columnist at Barron’s.
Bill Luby’s emphasis is on the Relative Volatility Index (RVI). Mr. Luby says, “I get a great deal of use from the RVI indicator over many different time horizons”.
Donald Dorsey first explained the RVI in Stocks & Commodities, V. 11:6 (253-256) The Relative Volatility Index by Donald Dorsey. Donald Dorsey noted that the RVI is the relative strength index (RSI) with the standard deviation over the past 10 days used in place of daily price change. According to Donald Dorsey, “Because most indicators use price change for their calculations, we need a confirming indicator that uses a different measurement to interpret market strength…. The initial testing indicates that the RVI can be used wherever you might use the RSI and in the same way, but the specific purpose of this study is to measure the RVI’s performance as a confirming indicator”.
I have been a member of StockCharts.com for over 9 years. I was so impressed with Mr. Luby’s use of the RVI and how it confirms using a different method than price change, I have emailed my contact at StockCharts.com to see if they would consider adding the RVI. Let’s keep our fingers crossed!
John Mangun – MangunOnMarkets.com
John Mangun’s Favorite Stock Trading ToolsJohn Mangun first became interested in stock trading in his early teens. He began following stock price action of major companies in the daily newspaper long before the computer. In 1976, John Mangun earned his license as a stock broker on the New York Stock Exchange and also became licensed and registered for the Options and Commodity Exchanges.
John Mangun believes that simplicity is critical and one of his favorite stock trading indicators is the MACD. Mr. Mangun says, “The key to Technical Analysis is to keep it simple in order to identify the only thing that matters; trend. Therefore Moving Averages and Moving Average Convergence Divergence (MACD) is my key to the deal”.
Mr. Mangun warns against over simplifying the MACD indicator. He says you should not use the default settings for the MACD. Mr. Mangun says, “BUT – and it is big but – there is no such thing as a ‘default’ setting. Each issue and every index moves in its own rhythm and pattern. I do TA on eight indexes and 65 issues and every one of these has its own parameters. Further, like life, the rhythm changes and you must then change your ‘default settings’. As a fighter or sports team must alter their strategy depending on their opponent, so to must you work to figure out and understand each individual stock. I learned this early in my career, back in 1974, watching the most profitable trader I ever met trade only one issue: Teledyne Technologies. He knew the trading pattern so well he could almost tell you exactly what the next tick would be and what the closing price would be for the day and week”.
So there you have it – the experts have spoken! There were elements of catalysts, some chart patterns, and even a little predator versus prey ideology. May you find the wisdom from the experts above profitable in your own trading.