Option Trading Secrets
Despite all the components that make up what we today know as technical analysis, there really only are four core elements: there’s price, there’s time, then there’s volume and finally there’s momentum.
Now, the first one, price. That’s considered to be the basis of the market. That’s the only truth there ever will be, the current price. So if you ever watch CNBC or Bloomberg and you’re listening to someone saying that a stock of so-and-so will reach a such-and-such price, just remember, it is their opinion and nothing else. And the only thing that matters is the current price.
Time is another important topic which very few traders ever consider as an analysis tool to take into consideration when trading.
Volume is another tool which is considered an immensely important tool in many traders’ analysis. You may have heard analysts say that big moves require big volumes to make the market move but that’s actually not my experience. You can look at how bull markets or bear markets start. They often start on very, very little volume and then they will finish on big volume.
And finally, there’s momentum, which is an incredibly important tool, at least in my own trading. It measures the velocity of the price move and later on I’m going to show you how I use momentum in a short-term trading strategy.