Using the W5T MTF Dot Cloud on Stocks – The Big Picture

For this trading journal article I wanted to take a step back and show how the W5T MTF Dot Cloud indicator from our “Day Trading Add-On Suite for ThinkorSwim” can be used to quickly analyze stocks ON ANY TIME-FRAME.  The intent here is not to get into a specific setup on a particular stock, but rather for YOU to build a small list of stocks that YOU would like to analyze to trade.  Therefore, how this indicator can help you in that endeavor.  Let’s say you have built a list of your favorite growth stocks that you want to look for opportunities to trade on a daily time-frame.  Your trading plan calls for buying pullbacks on strong trending stocks. (the trend can be up or down.)

Here is how you can use the W5T MTF Dot Cloud Indicator to rapidly find the opportunities out of your list to find stocks that may be setting up for trading on a Daily time-frame: (Click on all images to enlarge in a different window)

• For using the MTF indicator with stocks you have to change the settings of TOS to not use the extended hours timeframe and you have to uncheck the aggregation period setting.

• For trading on the daily timeframe I like to set the dot cloud times to Monthly, Weekly, 4 Days, 2 Days, and Day timeframes. Note that when you set your chart timeframe to daily that this makes the top two rows identical (both daily).

• The bottom rows are what I call the anchor trends, these are the monthly and weekly timeframes. Look at these FIRST – spot the main trend.  THEN look into the lower timeframes and try to spot whether there is a pullback going on. (pullbacks are colored opposite the main trend.  For example, if the monthly is green indicating a bullish trend do I see red’s above that line indicating that the smaller timeframes are pulling back?)
• Now rapidly go through your watchlist or key stocks you are analyzing making note of the stocks that appear to be in pullbacks. Once that is accomplished begin looking for trend following setups and make your trades!  Here are a few examples:

Can you see pullback opportunities in AAPL, GOOGL, MSFT (spots where the overall bullish trend as noted in the bottom GREEN rows turned against the main trend on the lower timeframes)?

Can you spot LULU’s pattern in the box and its breakout?

How about bearish trades and then a reversal in TWTR? Is TWTR potentially setting up for another long after a pullback against the now bullish trend (yes I think it is!)

Would you buy pullbacks in these ETF’s or are you trying to short them? They look bullish to me…counter trend trading can be done but you have to know when to take profits…don’t counter trend trade until you master trend trading!

A couple of stocks on extended pullbacks. Looking for potential long setups…time will tell!

NOW YOU PRACTICE THIS WITH YOUR LIST.

Go through a selection of stocks and ETF’s.  Can you spot pullbacks that ended up being great opportunities to get into a stock or ETF?  Can you spot trend reversals (where your anchor time-frame switches trend)?

Do you want to trade on a shorter time-frame like perhaps an hourly chart? Ok…set your rows to Week, 2 Day, Day, 4 Hour and 2 hour, on an hourly chart. Therefore, the Anchor time-frame is the weekly and 2 day chart rows so look for pullbacks on shorter time-frames. Then setup trades in the direction of the main trend using our other W5T tools such as the “Elliott Wave Indicator Suite for TOS“. That’s it!

Summary

We’ve gone through a simple but very powerful use of the W5T MTF Dot Cloud indicator from our “Day Trading Add-On Suite for ThinkorSwim” that can be used on stocks as well as futures.  Today’s journal showed how to setup the indicator to use it as a pullback or trend reversal spotter on the daily time-frame. Helping to quickly go through a list of stocks, ETF’s and futures to determine where in their trends they are. Once the list of prospects is gone through, one can then use the strategies and indicators contained in the “Elliott Wave Indicator Suite for TOS” for identifying particular setups for trade entry and exit. (refer to other trading journal articles for those setups!).

Trading pullbacks versus chasing trades perhaps far too late in their trends is what separates the “fear of missing out” amateurs from the pros.  These powerful indicator tools can help one along the journey of becoming a successful trader.