Trading with Regression Trend, 21 day MA, RSI, and MACD
Updated
I just wanted to share some tricks I learned using some basic TA tools in trading view. I marked up the NASDAQ with some examples. Please note that hind sight is 20/20 and using these tools in real time is much harder.
First, I think the Regression Trend tool is underutilized by traders. It is a very powerful tool for automatically generating trading channels. IMO, I would wager that most automated trading algorithms use some form of this technique under the hood. Linear prediction is the easiest and most common form of regression analysis. What you are trying to do is fit linear a trend to the stocks movement. IT takes a little practice to know when a trend has switch from bull to bear and back again. I find that the 4h is a good time frame to eliminate a lot of the noise in prices. Also, heikin ashi instead of candle sticks can make this easier, but you can't see gap ups/downs, which can be important. One way to ID a trend change is to look for a new high to break out and clearly close above the current channel. Once you find the "pivot", then you start a new regression trend moving it along to keep up with the previous day's price. Some times it can be better to let it lag a day or two to better estimate the price's location in the trend, which may be important when a trend first starts as there is not much data for the prediction. What you are looking for is highs and lows that get close to or have a candle wick out of the trend. This give you a high probability that the price is about to reverse. That is kind of the whole thing. Just keep movin gthe trend along with each day looking for the price to touch the top or bottom of the trend.
Obviously, more info is better. This is where the other tools come in. The 21 day SMA is a nice one (you have to configure the MA to days not the default and set it to 21). If the price touches this level, it will most often bounce off (up in a bull market and down in a bear). You should also look at the RSI for obvious overbought and oversold conditions. Again, the 4H seems to work best for swing trading. You need to use the regression trend with the RSI as the RSI reading can give you a "false" trigger in strong markets as it can stay oversold or overbought for several days. Last by not least is the MACD. It is a great momentum indicator that you can use to determine when the market is switching gears from buying to selling and vice versa.
There are other more advanced tools like trend lines, fib levels, and Waves that are very helpful, but to be honest I think you can be very successful with just the basic techniques I described. Maybe another day I will go into more detail on those tools.
Hope this helps and good luck.
First, I think the Regression Trend tool is underutilized by traders. It is a very powerful tool for automatically generating trading channels. IMO, I would wager that most automated trading algorithms use some form of this technique under the hood. Linear prediction is the easiest and most common form of regression analysis. What you are trying to do is fit linear a trend to the stocks movement. IT takes a little practice to know when a trend has switch from bull to bear and back again. I find that the 4h is a good time frame to eliminate a lot of the noise in prices. Also, heikin ashi instead of candle sticks can make this easier, but you can't see gap ups/downs, which can be important. One way to ID a trend change is to look for a new high to break out and clearly close above the current channel. Once you find the "pivot", then you start a new regression trend moving it along to keep up with the previous day's price. Some times it can be better to let it lag a day or two to better estimate the price's location in the trend, which may be important when a trend first starts as there is not much data for the prediction. What you are looking for is highs and lows that get close to or have a candle wick out of the trend. This give you a high probability that the price is about to reverse. That is kind of the whole thing. Just keep movin gthe trend along with each day looking for the price to touch the top or bottom of the trend.
Obviously, more info is better. This is where the other tools come in. The 21 day SMA is a nice one (you have to configure the MA to days not the default and set it to 21). If the price touches this level, it will most often bounce off (up in a bull market and down in a bear). You should also look at the RSI for obvious overbought and oversold conditions. Again, the 4H seems to work best for swing trading. You need to use the regression trend with the RSI as the RSI reading can give you a "false" trigger in strong markets as it can stay oversold or overbought for several days. Last by not least is the MACD. It is a great momentum indicator that you can use to determine when the market is switching gears from buying to selling and vice versa.
There are other more advanced tools like trend lines, fib levels, and Waves that are very helpful, but to be honest I think you can be very successful with just the basic techniques I described. Maybe another day I will go into more detail on those tools.
Hope this helps and good luck.
Note
Here is an update for Friday after another drop.
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