Chart Indicators Find Strength In Weak Market

Simpler Trading Team

Simpler Trading Team

In this article:

  • Adapting to market highs and lows
  • Stock chart indicators can guide traders
  • Phoenix Finder rises to face bear market

And the tumble continues.

Hopes of higher prices across the market were dashed once again as all three major indexes opened the session lower and struggled throughout the day. While the Dow recovered to close on a positive note, the Nasdaq and S&P 500 fell again.

What goes up must come down may not be what traders want to hear, but this market is proving this principle with earnestness.

Traders are searching for strength in a weak market seemingly bent on proving doomsayers correct. Or at least maintaining the bearish trend with a sizable dose of uncertain chop along the way.

Traders adapt strategies in weak market

This market is forcing traders to adapt strategies and tools within a downtrending environment.

The key is finding stocks with strength in an uncertain market where stocks of all types – including past “darlings” – are showing weakness.

Recent financial news is repeatedly filled with expected strong stocks, like major retailers, delivering less than stellar earnings reports.

The overall market went from a rally higher on Monday to a bearish spiral downward into Tuesday. Only the Dow came out unscathed on the day.

The Dow closed at 31,928.62 points to gain a meager .15% (adding just 48.38 points on the day). The Nasdaq dropped to 11,264.45 points for a 2.35% gap down while the S&P 500 stumbled .81% to 3,941.48 points.

Chart indicators find strength, weakness

Slowing economic growth, inflation, interest rates, struggling supply chains, recession fears – all these are market pressures that traders can watch for changes or news that amplify these pressures. These can lead to trade opportunities in a downtrending market.

Yet, trying to track all these market pressures at once can be overwhelming to traders.

Stock charting tools – indicators – are a way for retail (individual) traders to process market data and variables and condense this information into a “squiggly line” on a chart. In the world of online trading and computer algorithms that operate at lighting speed, these are must-have tools for traders.

Indicators are designed to track technical and analytical information of stocks. The design helps traders understand how a stock price may perform – or move – in the future, based on past and current data related to the stock.

Each indicator is different, and some specialize in certain data points while others are more general. Indicators can be selected based on the individual trader’s style and strategy, and these tools fit into what traders call technical analysis.

Indicators can track moving averages, trends, highs and lows, relative strength, volatility, and much more. These data trackers can also follow economic information or company earnings reports. And, indicators can be applied to various time frames, including minutes, hours, days, or months.

Indicators are used to identify trading opportunities by analyzing all the past and present data in an attempt to anticipate upcoming trends in chart patterns and stock price.

The Simpler Trading team generally defaults to indicators that deliver data from four key categories:

  • Volume
  • Volatility
  • Momentum
  • Trend

With any indicator, the key is to balance the input in an effort to validate entries and exits, and make more precise decisions.

Deciding on free or premium indicators

A way to watch the market is through stock chart indicators which are found on all online trading platforms.

There are two types of indicators:

  • Free – These are included for use with trading platforms and can perform a variety of typically specialized data collection. Traders tend to start with these before advancing further with indicators, but many of the “originals” – like the TTM Squeeze – are still used well into trading careers.
  • Premium – These indicators are typically designed by experienced and professional traders with the goal of bringing multiple data collection points into one tool. These tools are more robust (often containing multiple tools working in the background) than the basic indicators and usually must be purchased from their creators or a trading platform.

Not all tools – free or premium – work on all trading platforms. Some basic tools were designed years ago and never updated, and some premium tools are designed for exclusive use on certain online trading platforms.

Traders need to assess their style of trading and find indicators that fit their trading platforms, trading plans, and daily trading goals.

Tools for use in a wild market

Stock charting tools serve a central purpose: gather real-time information for fast decisions for when to enter (buy) and exit (sell) in each trade.

Tools are arguably more important now in this volatile market than during a more sustained trend in the market (think the bull market of the past decade).

Trying to keep up with computer-assisted stock market research is not only tedious, but almost impossible. Researching a full watch list of stocks is time-consuming, even with indicators, so traders need these valuable tools. 

Indicators are important because they simplify price information, track trends, identify trade signals, and give insight into possible changes in trend or price.

Traders should have a trading plan in place, but that plan must include strategies and tools to know when to enter, hold, or exit a trade.

Indicators help give traders an advantage over others who might rely solely on news analysis or those who execute trades after price moves take place. All traders have FOMO (Fear Of Missing Out), but savvy traders use tools to keep from getting to the party too late.

Selecting the best indicators for any trading plan is, again, a personal decision based on individual priorities in trading. For those who need a little help selecting indicators, check out the free ebook, Best Day Trading Indicators.

Start with this guide (experienced traders can use this, too) and work from there.

Why use stock chart indicators?

Trading is a lot easier said than done – there is always risk involved – and much of the experience traders need to develop requires trial and error, patience, commitment, and a little art mixed with science.

Stock charting tools support these skills, but just because you have the latest indicator doesn’t guarantee success in trading. Tools must be used in the way they were designed to be effective, and often require a dose of experience mentioned above.

The goal of tools is to create an edge that other traders might miss, i.e. identifying a potential shift in the market ahead before others see it.

Consider the trading environment of today. When a news segment hits the airwaves or internet and the market reacts, traders are left to unscramble this reaction as the market moves higher or lower. Or, “big news” has little effect and the market chops along and traders must work through this chop like any sudden shift in direction.

Indicators can be used to unscramble all the data following a news event, earnings report, etc., and let the trader follow price action on a chart.

This leads to confidence for the trader knowing that the indicator is pulling in the data and revealing movement.

Top tools for traders

A top premium indicator from Simpler Trading is the Phoenix Finder.

For years traders navigated a bull market that trended higher despite any sudden or short-lived pullbacks. The Phoenix Finder was designed to track stocks and price action within a bull market.

But as the market shifted and the bears gained control, was the Phoenix Finder rendered useless?

Not at all. Just like the immortal bird in Greek mythology, the Phoenix Finder gave new life to trading plans by tracking tickers to the short side.

Rising from the ashes of a bull market, the Phoenix Finder now works to identify weak stocks falling fast in a bear market. 

The Phoenix Finder gives traders a starting point that then keeps stock tracking in one place to:

  • Review the overall market
  • Identify indexes showing strength or weakness
  • Track sectors and industry groups
  • Focus on targeted industries or sectors based on money flow
  • Let the Phoenix Finder determine potential entries for trades

The current market environment has revealed possibilities for shorting fast rallies that fizzle quickly.

This market shift gives rise to opportunities when using the Phoenix Finder which works to identify the weakest links in stocks and put together short setups. Simply put, traders can use the Phoenix Finder to identify triggers and trends shifts that may lead to short trade setups.

And, if stock price shifts back to the upside, the Phoenix Finder can light the way higher.

How to find a trading mentor

If you are looking for a trading mentor who has “been there, done that” then consider getting to know more of the team members at Simpler Trading. Each has a unique style and strategy with a focus on reaching financial freedom.

You can get to know our team members through our community of like-minded traders. Gain access to live-trading sessions and real-time stock alerts while learning how professionals operate in this market. Give it a try today.

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