The concept that “price has a memory” is a crucial principle in trading. This notion suggests that historical price levels are significant markers for future price movements. With their vast resources and sophisticated algorithms, institutional investors frequently use these historical levels to place orders, triggering price breakouts or breakdowns. Understanding and leveraging this concept can be a game-changer for retail traders, and this is where NeverLossTrading (NLT) provides a significant advantage.
The Concept of Price Memory
Price memory refers to the idea that past price levels influence future price movements. When a stock, currency, or commodity reaches a level where significant trading activity has occurred in the past, it often reacts predictably. These reactions are due to the collective memory of market participants who view these levels as crucial points of support or resistance.
Institutional Investors and Critical Price Levels
Institutional investors, who account for the majority of trading volume in the markets, meticulously analyze historical price data. They use this data to identify critical levels where significant buying or selling pressure previously occurred. These levels become focal points for placing large orders, anticipating that the market will react as it did in the past.
At NeverLossTrading, we developed three studies and concepts to identify and highlight those crucial price levels and let our algorithms paint them on the chart for our users:
- The NLT Box: critical short-term price levels based on historical data
- NLT Price Breakout Study: Longer-term price levels should be considered for breakouts, break-ins, and border-to-border trades.
- NLT Earnings Price Move Concept: critical earnings-related price borders.
These studies support our trading decisions; however, we base all trading on NLT Signals and relate them to what is happening on the chart.
Here are three chart examples explaining the basics of how and when:
AAPL, NLT Box Breakout
The NLT Box frames in gray dashed lines, critical short-term price levels, and we trade on box breaks to the top or downside and on box break-ins, assuming that opposite orders attract. Crucial is: we do not trade purely breakouts, but breakouts supported by NLT signals. On the following chart, you see a floating out Buy signal and a system set target in form of a gray dot – this is where we take profits.
AAPL, NLT Price Brekout Study
The NLT Price Breakout Study frames a critical longer-term price range and according to the breakout and break-in trades explained for the NLT Box, we trade on NLT Signals at breakout borders. The longer-term critical price range framed by the cyan box and borders hold up longer than the NLT Box. By a dashed line, the NLT Price Breakout Study identifies target levels where prices migrate with a high probability.
We also developed a critical price range to consider at and after the week of earnings and trade with signals at a breakout.
AAPL, Earnings Price Range
Please watch out for the orange dash borders, they signify the crucial earnings rang and we trade on the first confirmed breakout signal, Buy > $177.78, and by the strong nature of the earnings range break, we show two system-set targets to aim for in one to ten weeks. Target-1 was reached in one week and target-2 in five.
We could continue with countless examples but offer you to advance your trading by integrating those tools into your decisions and we jointly look and talk about which NLT System or system combination suits you best:
contact@NeverLossTrading.com Subj.: Consulting
As a summer special, we integrate those critical studies on an exciting offer when you sign up for an NLT Mentorship before September 1, 2024.
Let us go through an exercise to appraise the market stage: SPY (ETF of the S&P 500 Stock Market Index) is a fantastic instrument for evaluating the overall stock market. For a longer-term view, we use weekly charts. Our example chart combines NLT Top-Line, NLT Trend Catching (gray) and SwingPower (yellow) signals that supplement each other. NLT Top-Line signals have two target dots, where we anticipate reaching the first in one to five weeks and the second in one to ten weeks. NLT SwingPower signals reach 1-SPU and thus only one target dot. Our charts frame up moves in blue and down in red, where the red line functions as a trailing stop line. We only accept a trade when the formulated price threshold of buying > or selling < is confirmed in the price movement of the next candle and highlight signals where this was not the case with, not confirmed.
The SPY chart shows eight confirmed price move indications that reached their system-set target. Three indications were not confirmed.
SPY NLT Weekly Chart October 2023 to End of May 2024
Situation-1, (10/30/23): A confirmed NLT Top-Line signal with three weeks to close at target-1 and eight weeks to target-2. The two following signals confirmed the direction of target-2.
Situation-4,(1/8/24): Confirmed NLT Top-Line Signal with two weeks to target-1 and three to target-2. The additional signals 4 and 5 confirmed the direction and allowed us to extend the trade target to the yellow dot of the NLT SwingPower signal.
Situation-7, (4/8/24): Orange NLT Top-Line signal, announcing a potential pullback from the top and the signal target was reached in one week.
Situation-8 (5/6/24): Gray NLT Trend Catching signal was confirmed and is moving to target.
We do not claim that our signals always work but offer high probability, above 68% accuracy.
Why do we consider confirmed signals only?
We only accept critical price turning points when other market participants trade in the same direction and validate the potential price move.
NeverLossTrading’s Edge
NeverLossTrading harnesses the power of price memory through its sophisticated algorithms and AI-driven tools. Here’s how NLT provides an edge:
- Identification of Critical Levels: NLT’s algorithms continuously analyze historical price data to identify key support and resistance levels. These levels are then used to generate trading signals, helping traders enter and exit positions at optimal points.
- Predictive Analytics: By incorporating predictive analytics, NLT can forecast potential price movements based on historical patterns. This allows traders to anticipate market reactions and make informed decisions.
- Real-time Alerts: NLT provides real-time alerts when critical price levels are approached. These alerts are based on predefined conditions that signal when it’s time to buy or sell, ensuring traders act swiftly and decisively.
- Backtested Strategies: The trading strategies developed by NLT are thoroughly backtested against historical data. This ensures that the strategies are robust and have a proven track record of success in various market conditions.
- Educational Support: NLT goes beyond providing tools and signals. It offers comprehensive education to traders, helping them understand the importance of price memory and how to leverage it effectively. This knowledge empowers traders to trade what they see, not what they think.
- Practical Application
Consider a scenario where the S&P 500 has repeatedly found support at the 4,000 level. NLT’s system identifies this as a critical support level and generates a buy signal when the price approaches this level. Conversely, if the index has consistently faced resistance at 4,500, NLT would generate a sell signal near this level.
During earnings season, NLT’s Earnings Price Move Indicator can also frame the price range of candles linked to earnings, offering traders insights into potential price movements triggered by earnings announcements. This allows traders to capitalize on these movements by setting precise entry and exit points.
We integrate all of this into our NLT Alerts, which we send to subscribers, including the actual decision-making charts, and offer you a week of free alerts:
contact@NeverLossTrading.com Subj.: Free NLT Alerts
This is how they look, and we can help you explain; however, working one-on-one, spots are limited.
NLT Stock Alerts May 20, 2024
Conclusion
The concept that “price has a memory” is a powerful tool in any trader’s arsenal. By understanding and leveraging historical price levels, traders can make more informed decisions and improve their chances of success. NeverLossTrading provides the tools, strategies, and educational support needed to effectively utilize this concept, helping traders confidently navigate the complexities of the market.
Trade with the power of knowledge and precision. Embrace NeverLossTrading’s advantages and let crucial price levels guide you to trading success.
Sign up for our free trading tips.
Thomas
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