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A funny thing happens when you put up a price chart and ask people to define what the trend is.  Even when its completely obvious to someone like me, as in not any question at all, you will still get many different answers based on the exact same chart.This results from people not knowing how to find a trend on a price chart with any speed or accuracy.  It is actually quite simple, and is a key thing to know if you want to learn to trade.

The first thing to do is to size the chart properly.There is no real point in loading 5 years of data on a stock you plan to day trade and hold for a mere 5 minutes.  So here is a guide for what you need as far as time loaded on a chart:

Daytrade:

1. 1 min chart:  Have at least 2 hours of data (120 bars) on the screen but no more than 6 hours (1 full day).
2. 2 to 5 min chart: Make sure you have at least 3 hours of data up, but no more than 2 days.
3. 10-15 min chart:  Have at least 3 days of data up, but no more than 1 week.

For swing trades, which are a longer term hold, you will want a 10 to 30 minute chart on your screen, and additionally about 10 days of data.

As soon as you have the chart data up on your screen, change the bar type to a "bar chart" style.  This is easier to see the trend.Start by looking for every V bottom area.  Anytime there is a low with a V bounce, make note of it.Additionally, look for / top areas where the price spikes up and then sells off sharply.Focus in on the major ones where it moves significantly away from that area in a short period of time.Next you will want to get your charting draw tool and connect the V to each other V you see.  Connect the / to each other /.  Connect the low of the V, the highs of the /.  Again, this is a key to learn how to trade.

Lines that slope up to the upper right corner mean the stock is currently in an uptrend.  Lines that slope from the upper left down to the right means the stock is in a downtrend.Another easy method: Go to the first bar on the left, and then to the very last price on the right hand side.  Draw a line between the two.  If the line is sloping up - its an uptrend.  If the line is sloping down, its a downtrend.Another key aspect to notice is the oscillations around a central trendline.  Does it go +/- 2pts, +/- 1pt, +/- .50 etc - on average, not exact.This is how you can tell in general the strength of the trend.  The lower the oscillation, the stronger the trend.The thinking here is that the price hardly oscillates because the buyers in an uptrend chase is up and bid, and the sellers in a downtrend chase it down and offer so it does not really counter move much.

Another thing to keep in mind the more you practice, the faster it gets - the lines are no longer necessary.I can glance at a chart and know the trend and approximate strength within seconds.Additionally, you really need to know the trend direction and strength on the next higher timeframe than you are trading on.  For example, on a 5 minute chart the trend might be up, but on a 15 minute chart it is still down.  This needs to be paid attention to, because the longer term trend can push the shorter term trend back into a downtrend.  In general, you want a higher term chart to be a multiple of 3 vs the chart you are trading.  So if you are on a 1 min chart, you watch the 3 min chart also, if on a 5 min chart, you watch the 15 min chart.  Once you can easily tell the trend of any chart, other aspects of learning to trade become much easier.

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An interesting thing has happened in the last 6-8 weeks.  There are almost no sellers.  Literally.The market has made a massive directional push up and really just holds up and does not correct now.It seems almost funny now how difficult it is to short anything for more than maybe 20 minutes or more.As most traders find out - fighting the market is pointless, all you can do is react to what you are given.  But it sure makes trading hard - the buy and hold guys have it locked down.

One thing I know is that you cannot continue this indefinately - the chasing and then bidding the market so it wont sell will stop.  The only way you actualy make money, whether day trading or longer term investing, is to  lock in profits.Until then, its not reality.  At some point they will tip the tide to the point where a majority are actually fearful of losing gains and then the selling is real.

A favorite pattern lately has been to break down below a support (or even key support) and then out of nowhere a massive burst of buying comes in to rescue the market.  It happens so often I now expect it to happen.  Often this can result in a new daily low (the break) , only to see a new daily high 30 minutes later as the buyers relentlessly chase the market (im sure shorts are in there too, trapped like dogs).

Even when the economy was plowing along at full steam, we would have 10-15% corrections all the time.   And this was when everything was just perfect (or everyone thought so).Because of this I am not sure what is actually going on.  Several theories are in play that I think about:

1. Shorts are completely or mostly out of the market.  The SEC messing with the short rules before caused a panic, and now there are many proposals again in regard to uptick rule and shorting.  Rather than get caught, they are staying away from day trading and longer term positioning.
2. Manipulation factor on high.There is a group of funds or banks backed by the Fed and Treasury whose goal it is to push the market higher to form the opinion that the economy has turned.  The way the rescues happen like clockwork, the ramps into the close every friday, and other very odd trading behavior gives this some credence imo.  Would be easy for the government to just give these guys money to push the market up.
3. Traders are mostly gone, and computer algorithm trading takes over.  This one can happen as well - computers have taken over more of the futures trading which drives the market.Since no one tries to fight this trend, with all of them doing the same thing it just feeds on itself.  This one I like too because the actual variance of price during the rally pushes is actually uncharacteristically low most of the time.  I have seen the dow futures push up 100 pts in 20 minutes with maybe an 8-9 point max retrace the whole time.  Sure this happens - but not this often as it does now.

Whether any of these are true, or a combination, I have no idea and we may never.  All I know is the trading action is very odd and I expect at least half if not more of this gain to be gone when this is done.Note that I am not predicting a top in the market, I am simply stating that what goes up almost always goes down - and the down is usually painfull.The market could hit 9.000 or 10,000 etc.  I really dont think 10k is possible, with GM dust, C is dust and a few others they just dont have the fuel for the DJIA to actually push up that high in the short term.

Maybe everyone just needs to learn to trade again - this is the new market to stay!

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