{"id":12474,"date":"2012-03-05T06:00:50","date_gmt":"2012-03-05T11:00:50","guid":{"rendered":"http:\/\/club.ino.com\/trading\/?p=12474"},"modified":"2012-03-02T15:45:49","modified_gmt":"2012-03-02T20:45:49","slug":"how-to-be-a-trader-part-3","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2012\/03\/how-to-be-a-trader-part-3\/","title":{"rendered":"How To Be A Trader - Part 3"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft\" src=\"\/img\/sites\/ino\/email\/2466.jpg\" alt=\"\" width=\"200\" height=\"150\" \/>Today\u2019s guest is Markus Heitkoetter, CEO of Rockwell Trading and author of \u201c<a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1916\" target=\"_blank\">The Complete Guide to Day Trading.<\/a>\u201d\u00a0 Today Markus is going to share with you Part 1 in a series of articles on what he believes it takes to be a trader. We already talked about it in the previous article: Being able to determine the direction of\u00a0 the market is one of the most important skills of a trader, because it dictates the type you trading strategy you use. In a trending market, you want to use a trend-following strategy. And in a sideways market, you want to use a trend-fading strategy. For more information on this topic <a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1916\" target=\"_blank\">please read the previous article \"How To Be A Trader - Part 2\"<\/a><\/p>\n<p><strong>How To Identify The Direction of The Market<\/strong><\/p>\n<p>Way back in the 90s I used fundamental analysis to try and predict the market. Long story short, it didn't work for me.<!--more--><\/p>\n<p>&nbsp;<\/p>\n<p>Since the mid 90s I have been using<strong> technical analysis<\/strong> in my trading. When using technical analysis, there are two different approaches:<\/p>\n<ul>\n<li><strong>Chart Patterns<\/strong> and<\/li>\n<li><strong>Indicators<\/strong><\/li>\n<\/ul>\n<p>Examples of chart patterns are flags, pennants, triangles, double bottoms and tops, etc. Candlestick formations are chart patterns, too.<\/p>\n<p>Examples of indicators are moving averages, Bollinger Bands, MACD, RSI, etc.<\/p>\n<p>So which approach is \"better\"? Should you use chart patterns or indicators to identify the direction of the market?<\/p>\n<p>Easy answer: Use the approach that works for YOU. I personally use indicators. I like the black-and-white approach of indicators. As an example, the RSI is either above 70 or it is not. There's no grey area. I openly admit that I struggle identifying chart patterns while they are forming. Don't get me wrong: I am an expert showing you every single chart patter there is at the end of the day. But I can't identify them with certainty while they are forming. But hey, I can't ride a bicycle either, so maybe there's something fundamentally wrong with me <img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhDwAPALMMAP\/qAEVFRQAAAP\/OAP\/JAP6dAP+0AP\/+k\/\/9E\/\/\/x\/\/lAP\/\/6wAAAAAAAAAAAAAAACH5BAEAAAwALAAAAAAPAA8AAARXkEkZap2Y1ZXOGRcWcAgCnEMRTEEnnDCQrtrxxjCoJSZw+y+CKnDo\/WAEQ+WAwyUrvWZQGRg0TwKFcFX1xYI6zWCgEJizhBlrTGi31aKAYW4YZlgW2iQCADs=\" alt=\";-)\" \/><\/p>\n<p><strong>Using Indicators To Identify The Direction Of The Market<\/strong><\/p>\n<p>In my own trading I use Three Indicators to determine the direction of the market.<br clear=\"none\" \/> <br clear=\"none\" \/> Today we will talk about the my favorite indicator - Bollinger Bands. Bollinger Bands are a fascinating concept. They are available in EVERY charting software.<\/p>\n<p>Note: If your charting software does NOT allow you to plot Bollinger Bands on your charts, it's time to switch to a different software provider. Let me know if you need help finding a powerful charting software platform<br clear=\"none\" \/> <br clear=\"none\" \/> Back to Bollinger Bands. Bollinger Bands consist of a Centerline, which is a simple moving average, and two standard deviations. One above the centerline and one below. These are called the Upper Bollinger Band and the Lower Bollinger Band. <br clear=\"none\" \/> <br clear=\"none\" \/> I like to use a setting of 12 for the moving average and a setting of 2 for the standard deviation<strong>.<\/strong> <br clear=\"none\" \/> <br clear=\"none\" \/> And here's how to use the Bollinger Bands: <br clear=\"none\" \/> <br clear=\"none\" \/> In an uptrend you will see that the Upper Bollinger Band in pointing up in a nice 45 degree angle and prices are touching the Upper Bollinger Band. The Upper Bollinger Band acts like a trendline ABOVE the prices.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"\/img\/sites\/ino\/email\/4306.jpg\" alt=\"\" width=\"549\" height=\"269\" \/><\/p>\n<p>So how do you know when an uptrend is over? <br clear=\"none\" \/> <br clear=\"none\" \/> The uptrend is over as soon as the Upper Bollinger Band flattens or turns around.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"\/img\/sites\/ino\/email\/4307.jpg\" alt=\"\" width=\"548\" height=\"269\" \/><\/p>\n<p>In a downtrend you will see that the Lower Bollinger Band in pointing down in a nice 45 degree angle and prices are touching the Lower Bollinger Band. The Lower Bollinger Band acts like a trendline BELOW the prices.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"\/img\/sites\/ino\/email\/4308.jpg\" alt=\"\" width=\"551\" height=\"272\" \/><\/p>\n<p>And the downtrend is over when the Lower Bollinger Band flattens or turns around.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"\/img\/sites\/ino\/email\/4309.jpg\" alt=\"\" width=\"552\" height=\"274\" \/><\/p>\n<p>Try it out for yourself!<\/p>\n<ol>\n<li>Pull up your charting software, plot the Bollinger Bands on the charts with a setting of 12 for the Moving Average and 2 for the Standard Deviation<\/li>\n<li>You can use it with ANY timeframe, but if you are day trading, you might want to use a five (5) minute chart.<\/li>\n<li>Look at the current value of the Upper and Lower Bollinger Bands. Based on the definition that I gave you above, what is the market doing right now? Is it in an uptrend or in a downtrend?<\/li>\n<li>Now look back at charts. Can you see how the Bollinger Bands are showing you the trends?<\/li>\n<\/ol>\n<p>You shouldn't have ANY difficulty to determine whether a market is going up, down or sideways based on this simple definition. If you do have problems, let me know and I'll be happy to help. <br clear=\"none\" \/> <br clear=\"none\" \/> Keep in mind that this is NOT a trading strategy in itself! It's just a way to determine the direction of the market.<\/p>\n<p>Summary of \"How To Be A Trader Part - 3\"<\/p>\n<p>You can use chart patterns or indicators to help you identify the direction of the trend. I personally rely on indicators because for me they are more \"black and white\".<\/p>\n<p>My favorite indicator are the Bollinger Bands. They offer me an easy way to determine whether the market is trending or going sideways.<\/p>\n<p>Markus is CEO of\u00a0<a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1916\" target=\"_blank\">Rockwell Trading<\/a>\u00a0and author of the international bestseller \u201cThe Complete Guide to Day Trading\u201d. For a limited time INO Blog Readers can download his book free\u00a0<a href=\"http:\/\/broadcast.ino.com\/redirect\/?linkid=1916\" target=\"_blank\">here<\/a>.<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Today\u2019s guest is Markus Heitkoetter, CEO of Rockwell Trading and author of \u201cThe Complete Guide to Day Trading.\u201d\u00a0 Today Markus is going to share with you Part 1 in a series of articles on what he believes it takes to be a trader. We already talked about it in the previous article: Being able to [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1278,882,4205,3821,2918,4206,3440,4207,2545],"class_list":["post-12474","post","type-post","status-publish","format-standard","hentry","category-general","tag-bollinger-bands","tag-bollinger-bands-signals","tag-how-to-be-a-trader","tag-market-direction","tag-markus-heitkoetter","tag-mindset-of-a-trader","tag-rockwell-trading","tag-setting-realistic-goals","tag-winning-trades"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How To Be A Trader - Part 3 - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2012\/03\/how-to-be-a-trader-part-3\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How To Be A Trader - Part 3 - INO.com Trader&#039;s Blog\" \/>\n<meta property=\"og:description\" content=\"Today\u2019s guest is Markus Heitkoetter, CEO of Rockwell Trading and author of \u201cThe Complete Guide to Day Trading.\u201d\u00a0 Today Markus is going to share with you Part 1 in a series of articles on what he believes it takes to be a trader. 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