Is there are $3000 system that you can buy? Or maybe you can program the Holy Grail trading system? How about neural nets? Genetic algorithms? A double smoothed stochastic a of the indicator of the month? Maybe one of these will work for you, but we doubt it.
The key to consistent profits is picking low risk/high reward trades. You have to be disciplined enough so that you only trade when the odds are in your favor. You have to rigorously work to find low risk trades. And you have to be patient enough to wait for them Here is the way we look for those trades...
One of the first things we look for is internals divergences. One of the wonderful things about trading the stock indexes is the availability of market internals - advancing and declining volume, advancing and declining issues, new highs and lows. It is pretty tough to find the advancing issues for Tbonds or Pork Bellies. The internals provide a wealth of information about the health of the stock market. We look at a variety of measures, starting with the widely used McClellan Oscillator and various TRIN measures. We also have some proprietary measures, including the famous RBI, but you can really go a long way with the standard indicators. We look for these indicators to be lagging the price action, preferably over a period of time.
We also watch momentum. Classic technical analysis says that momentum peaks before prices. However, fading every momentum peak will send you to the poorhouse. But when we see internals AND momentum divergences, we go on full alert.
That is when we start looking at our overbought/oversold oscillators. We use several in our work, both price based and internals based. Some are proprietary, but once again, there are some very useable ones in the public domain. So now we have a situation where there are bearish internals and momentum divergences while the market is overbought...or bullish internals and momentum divergences and the market is oversold. This is the makings of a "Load the Boat" type of trade. The final step is locating support or resistance that might prove the catalyst. What to use for support and resistance? Previous swing highs or lows, gaps, fibonacci numbers, congestion areas. We use these and some proprietary techniques. Check multiple time frames and always look for clusters of support or resistance. The importance of the support and resistance is that they allow you to place a tight stop and limit your risk. After all, your trade is not guaranteed. You have simply identified a high probability trade. Place your stop just on the other side of the support or resistance, and you have a low risk/high reward trade entry. This type of technique will work on almost any time frame.
Of course, hitting a great entry on your trade is only one part of trading successfully. But it is an important part. This type of analysis enabled us to successfully call the market tops in February and August. And they have helped us compile a 65% win rate (with average winners twice as large as average losers) since we started publishing. If you would like to see this type of analysis being done in real time, sign up for a four week FREE trial subscription to the RBI Premium Service - CLICK HERE