This weekend I spent some quality time in the Lab experimenting with several different indicators. I focused on the Rate of Change indicator after noticing a consistent pattern to charts from prior trades. With the RoC applied, along side RSI with the same time frame setting, it became apparent to me that it could be useful in timing my entries & exits with more precision.
Below is an example of a chart that I did this morning on ARIA (Ariad Pharmaceuticals):
One thing you will notice here is how RSI & RoC seems to track rather closely as expected. It is the divergences where the value lies. If you note the dip on June 6, 2011 you will see that the RoC line made a deeper down move & bounced – a great spot to get long. What caught my eye this morning is how the RoC has peaked & rolled over. A sign that a TL test above may be quite difficult.
I am not one to ever get comfy with my trading arsenal so honing is in fact part of my trading preparation weekly. Robert Sinn did a nice guest post here over at TRB on this very subject of having an Edge so give it a read.
I encourage you to continue honing your trading skills by including chart indicator study – well worth the experimentation in my book.