Stock Price always moves in zig zags
Before we start talking about trading, we need to discuss some fundamentals behind stock prices moves.
Lesson 1. Introduction to Monkey Cycle Trader TradingView Indicator.
You can watch a video explaining that lesson.
If you open any stock chart showing historical prices for some stock, futures or crypto currency you will see that quite often price keeps moving in one direction for some period of time.
In the ideal world to profit from such a move up in stock price you will buy a stock at the low price shown on the chart in the lower left corner of the picture and hold it until it reaches the top.
Unfortunately, no one is able to catch the very bottom of a move down and the very top of the move up.
Professional traders do not try to catch tops and bottoms. They try to identify sustainable trends. They look for charts showing price moving in one direction. On the chart shown above you can see that price kept making higher highs.
Please note that the price did not move up in a straight up fashion. Price would make a move up and then it will come back down erasing part of the preceding move up. It looks like price was dancing making two steps ahead and one step backward. Those up — down steps create a staircase path that led the price higher and higher.
What professional traders normally look for is that sequence of “Higher Highs” and “Higher Lows”. This is what they call an “uptrend” or “bull trend”.
Stock prices can trend not only up but also down. In that case they keep making new “Lower Lows” and “Lower Highs”. Professional traders call that such period of times when a stock keeps making new lower lows the “down trend” or “bear trend”.
When they spot a stock that has been trending upward making new higher highs and higher lows they start looking for an entry point, another pullback making a higher low that follows a freshly made highs.
It’s not a problem to find an up trending or down trending stock. The problem is to find out at that price level a stock will complete its corrective pullback and turn back up.
Another technical problem we should solve is to know when it is time to bail out of a position. How to identify a reasonable level for a pullback and set a stop loss, a level of support that once gets broken should make you close your position to limit risks of a breakdown.
Let me introduce to you Monkey Cycle indicator and explain how it can help a trader to find a tradeable setups in up trending or down trending stocks, forex pairs, futures or crypto assets.
The first thing what Monkey Cycle Trader indicator does is recognizing a hidden rhythm behind market moves. Let’s come back to the first chart shows in this lesson and see what kind of valuable information you can get from the indicator.
You can see that indicator drew a bunch of horizontal lines at tops and bottoms of price moves (traders call them “price swings”). You could say that you can also draw those lines and you may hardly see how those lines will help you become a better trader. Yes, everyone and can draw those lines in the hindsight.
The trick is that Monkey Cycle Trader draws those lines in real time often before price makes a turn!
Watch this video to better understand how the indicator works in real time:
In the next lesson we will be talking about support and resistance levels, how price normally interacts with them and how we can use them in trading.
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