Trailing Stop at Trade10.com- The science of trading market momentum for stocks, options, futures and bonds.

Critical Day Analysis

Our critical day analysis is all about trend reversals. We tell you when there is a high potential for a reversal of the short trend and we've been doing it since 1994 with an 80%* accuracy.

Trade10 Home | Advertisement Opportunities | Recent Signals

Home

QuoteChart Opinion Profile

Enter Symbol:

Walk through a critical day

Our Service

MARKETS

Understand the graphs

Trailing Stop

All trades should have an expectation of a profitable result when entered. But at times the market moves against an investor unexpectedly producing a loss when the position is sold or closed. A trailing stop is one tool that is used to protect investors by minimizing loss or locking in profits if the market suddenly moves against a position taken.

Stop orders are orders that become market orders when the market price of a security reaches or exceeds a given set price. A trailing Stop order is one that is adjusted by the investor periodically to compensate for changes in price of the security. A new stop order is issued and the old one cancelled when creating a trailing stop.

The premise behind a trailing stop is to limit your losses. As long as losses are small, an investor is able to live to fight another day so it is better to stop out a losing trade than to risk a larger percentage of capital when the market moves in a way you did not expect. The other side of this premise is to let your profits run. A trailing stop, that is incrementally changed to follow the current trading price, allows profits to continue and should be far enough away from the current price level to compensate for intra-day volatility as price moves in a larger trend.

The Parabolic Stop and Reverse (SAR) is designed to provide stop loss levels for both sides of the market. With each day's trading the Parabolic SAR moves incrementally with price. When the SAR intersects with price due to a price reversal or loss of momentum the trade is considered to be stopped out. At that point the other side of the market is taken and the Parabolic SAR starts fresh indicating a possible trailing stop value for the investor. Using the Parabolic SAR can be very helpful as long as the security is not prone to short term price trend reversals. If price is erratic, reversing quickly in the short trend, the Parabolic SAR will likely produce poor results.

To the right technical studies are examined in more detail to provide a sense of conformational evidence for traders of the critical day. Click on any of the terms to take a closer look at a technical discussion on that topic. All formations, patterns, indicators and technical tools fail at various times and so should only be used to build a body of evidence in forming a trading decision rather than being solely relied upon. There are a number of valuable studies that lead to intuitive understandings about price and volume but a strong compliment to technical analysis is an understanding of the trends and changes in the fundamentals and economic activity that ultimately lead valuation levels in the markets.

Walk through a critical day

The graphs show a price plot of the Dow Jones Industrials from Sept 28/00 to early November. The First graph ends on November 3/00, two days before an upcoming critical day on November 7/00. Our members looking at the market are expecting a trend reversal to occur due to the high rate of success in our research. Ideally a member will be using their own skills to judge the supply and demand changes, using technical and fundamental indications to confirm suspicions of a reversal, and trade accordingly.
On the second graph we see that the price action on November 6 was a bullish day, reversing the short trend so that the short trend leading into the critical day is now up. A critical day is an expectation of a reversal of the short trend that immediately precedes the critical day. In the case of the November 7 signal, given to members 3 days before, is an indication that the upward moving trend, recognized at the close of November 6 is expected to reverse direction.
On the third graph we can see that November 7 was a low volatility after a large gain on November 6 of about 160 points for the Dow Jones Industrials. The subsequent move over the three days following the November 7 signal saw the Dow Jones Industrials fall 376 points. The next day, November 13, the Dow Jones Industrials lost an additional 83 points with intra-day low a full 609 point loss since the open on the critical day.

Most recent signals

A closer view of the most recent signals. You can see the short trend immediately prior to a successful critical day, reverses coming away from the critical day. Often a failed critical day will indicate a stronger bias in the market for continuation of the trend that was in place prior to the critical day. A failed signal can therefore provide as much information and opportunity as a successful one. Take a look at tech studies to develop a sense of trend reversals and use.

Tech Studies

Comparative Relative Strength

Congestion Pattern

Consolidation