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Technical Tools

Video Transcript

In this Track 'n Trade 5.0 Futures trading training video, I want to start by demonstrating for you how to draw some of our charting tools.

What you see on the screen, is you see that we have Cotton open. You can see that Cotton has been going in a nice trend. If we want to use some of our mark up tools to help us remember some of our thought processes, that's what these drawing tools up here are meant to do.

The first drawing tool is just a simple cross hair that we can draw on the chart. By holding down the left mouse button and scrolling it around on the screen, you can put the cross hair tool wherever you desire. If you have the third tab selected, you'll notice that you have all the preferences for the Cross Hair tool.

We can come in here and we can turn on and turn off the horizontal line, or turn on and turn off the vertical line. We can change the font size if we would like. Notice that everything we do is immediately reflected onto the screen. There are a lot of features that you can do with each individual tool, and those settings are all controlled over here in the left control panel. You can also right click on the tool, of course and hit Delete.

The next tool is just a simple trendline. If we want to draw a simple trendline on the screen, we have the ability of dragging and releasing the mouse. That gives us a nice simple trendline to highlight an individual trend within the market.

There's another feature that we can do in here. We can come in here with the trendline, we can pick two points on any given trend.

For example: we can come in and select the lowest point, we can also select up here and drag it to the next lowest point, so we have a small point in here. Come over here to linear extensions, click the Linear Extensions. It will then draw a linear extension line that jumps out to the edges of the chart, based on those two points. Of course, you can move those points if you would like- to a different section, or recalculate it to any section, or any price point that you would like. And you're going to get your linear extensions. Of course, we can right click on the tool, and hit the Delete key.

The next one is a multi-line tool. If you're just trying to highlight or outline a simple trend of some sort, you have access to the mult-line tool. We can click, click, click, and you will notice that each time you click, it just draws another line. Once you get to the final area where you no longer want to have an additional line, rather than left clicking, if you right click, that stops the tool from continuing.

You'll notice that we also have all the settings for the multi-line tool over here in the left Control Panel window. I'm just going to hit the Delete key on the keyboard. Notice, because it has a handles on it, the little squares on each place, it will delete that tool off of the screen.

The next tool is the 123 tool. The 123 tool is a very powerful tool, but in its simplicity, one of things we use it for is to identify tops and bottoms, and trends. We use it to highlight different trends.

Here we go, this is the 123 top formation, you'll notice the number 1 formation is the annual high. The first draw down is the number 2 point, and we highlight that by drawing that in there. The number 3 point is the pullback on that region. Of course, you can notice and you see that this number right here- if you have it turned on over here in the Control Panel shows you that it was a 45.1% retracement. Then, it gives you a projection of how far out we anticipate this market dropping to. Of course, you can see this is the 100% level and this is the 90% level. You can come in and those are all user-definable fields, and you can change those within the Control Panel over here in the ABC tool. I'm going to just select that, I'm going to hit Delete on the Delete key, remove that from our screen.

The next tool is a Head & Shoulders tool. The Head & Shoulders tool- let's see if we have a chart that has a Head & Shoulders on it. Let's come over here to the Feeder Cattle contract. The Head & Shoulders tool is a tool- I'm going to back the chart up just a little bit. This is kind of a little Head & Shoulders in here. We're going to come in here and highlight- this is the left shoulder, we simply do this by left clicking. We find the lowest point of the first draw back and this is the neckline, first neckline, we click on that. Pull it up to the highest point, and that's the head, pull it back to the next neckline. When we click, you'll notice that it immediately draws in there for us, a trendline. We identify the right shoulder, we click on that. That gives us this neckline area. Of course, this is how we outline or define a reversal point.

A break below that neckline right there is an indication that the market has changed from bullish to bearish and that would be a sell signal. We would get in the market short on a break below that position. That's a Head & Shoulders tool.

That can be a Head & Shoulders top or a Head & Shoulders bottom. If you come in here and look, we also have a Head & Shoulders bottom. We start off with the left shoulder, the neckline, the head, the neckline, and back down to the right shoulder. Of course, a break above the neckline, this would be an indication that the market has changed from bearish to bullish.

Those are a couple of tools that are very handy for us and how you draw them.

The next one is a just a simple Narrow Sideways Channel. Let's come back over to Cotton. A narrow sideways channel is a market that is just simply going sideways, all we want to do is bracket that market, draw a couple of trendlines at the top or the bottom of that market. You'll notice that we had a breakout of the top, right here of this trendline, we also had a breakout of the bottom right here. This would be a buy signal, this is what we call a false breakout. This would be a sell signal where we would reverse our position and go short for the short side. That's a narrow sideways channel.

The next tool that I want to show you is the 50% tool. What this does is it just retraces for us, or just measures for us the distance between 2 points, and where the 50% level is. Markets have a tendency to move 50% of the last major move, or retrace 50% of the last major move. Here we have a market where its gone from 0 to 100 and then it retraced back down to 50%. That's a nice tool, just for measuring purposes.

The next tool is a simple channel tool. It helps us identify channels. We can do it with a downside channel, by clicking at the top, at the bottom of the channel, drawing our lower trendline all the way down, clicking one more time, and bringing the top trendline. It's a simple and easy way to draw a nice little channel over the top of a given area of support & resistance. I'm going to delete that tool by right clicking on it and hitting Delete.

The next tool I want to show you is a simple little Triangle tool. There are a lot of triangles in this market. We love triangles. The way we draw a triangle tool to help us outline a triangle, we simply find the highest point, and the lowest point of the triangle. Then, we drag out the point of the triangle. The breaking of the triangle is our signal, in this case, to go short the market. So the breaking of that trendline, the breaking of that triangle is a sell signal. That's where we get in short this market.

I'm going show you the next one is just the simple Trend Fan tool. The Trend Fan tool is used to identify areas of support and resistance. We start at the low or the high of a trend. We've used, basically we usually use 3 different trends. We go across the top of the trend, we find the center point of the trend, and then we find the lowest point of the trend. We right click the last trend, the last fan, and that stops the fan from continuing to draw. What we have is we have a left click, left click and then a right click. You can see that this would be an area where we would consider that the market is changing from bullish to bearish and this would be a sell signal on a break below the third trendline right there. That would take us short this market.

Those are some of the simple tools available for us for drawing recurring price patterns within Track 'n Trade.


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