You do not need to be glued to your trading screen to take advantage of the strategies used by top market players to profit from stocks, futures and forex. Start with a giant step back, setting your focus on weekly patterns that carve out more reliable highs and lows than daily or intraday price action does. Then, build management rules that allow you to sleep at night, while the fast fingered crowd tosses and turns, fixated on the next opening bell.

Algorithms, also known as high-frequency trading (HFT) robots, have added considerable danger to intraday sessions in recent years, jamming prices higher and lower to ferret out volume clusters, stop losses and inflection points where human traders will make poor decisions. Focusing on weekly charts avoids this predatory behavior by aligning entry, exit and stop losses with the edges of longer-term uptrends, downtrends, support and resistance.

This big picture approach lowers noise levels considerably, allowing the weekly trader to see opportunities that are missed by short-term players flipping through their daily charts at night. Admittedly, these trade setups require patience and self discipline because it can take several months for weekly price bars to reach actionable trigger points. However, higher reward potential makes up for this lower activity level, while total work effort allows the trader to have a real life away from the financial markets.

Weekly charts utilize specific risk management rules to avoid getting caught in big losses:

  1. Lower position size and avoid the overuse of margin. A few hundred shares will do the work of a thousand or more when you let prices travel many points before taking your profit or loss.
  2. Be selective in position choice. As a general rule, highly capitalized equities and the most popular exchange-traded funds (ETF) generate better weekly trades than small cap darlings or high flying biotechs that can drop 30% to 50% after an adverse FDA decision.
  3. Focus on the edges of long-term ranges and moving averages. Opening a weekly trade in the middle of a 15- or 20-point sideways pattern is a sure-fire way to lose money, while buying a pullback to the 50-week EMA can produce outstanding results.
  4. Respect the power of opportunity cost. The capital you set aside for a weekly trade that lasts several months cannot be used for a higher reward setup that magically appears while you are managing the other position.

Feel free to add fundamental techniques to your weekly technical trade criteria. For example, solid earnings growth will increase your confidence when buying a stock that is nearing a weekly support level after a sell-off. Moreover, dollar cost averaging can be utilized aggressively, adding to positions as they approach and test these action levels. But do not get blinded by the company’s balance sheet if support breaks because you will need to take your loss aggressively.

Let’s look at four weekly trade setups carved out by Powershares QQQ Trust (Nasdaq: QQQ) over a 14-month period in 2013 and 2014.

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Image by Sabrina Jiang © Investopedia 2020

The fund entered a weekly trading range, with support near 85 in November 2013. It rallied above 90 at the start of 2014 and sold off, returning to long-term range support in April. Weekly traders could build low-risk positions at that level (1), ahead of a 7-week bounce that added more than 7 points. In addition, a second buy signal erupted when it rallied above January resistance (2), favoring a new entry or continuation of the first position, which is now held at a substantial profit.

The steep October slide set up a third weekly trade entry when it descended to support above 91 (3), created by the June breakout. That level also aligned perfectly with support at the 50-week moving average, significantly raising odds for a bullish outcome. The fund went vertical off that support zone, testing the yearly high and breaking out into year’s end. A final buy signal goes off when it breaks out into triple digits in November (4).

April and October pullbacks into weekly support (red circles) raise an important issue in the execution of weekly trades. Both declines violated support mid-week and bounced, closing Friday’s session above those contested levels. While positions should be taken as close to weekly support as possible, stops and other unprofitable exits need to avoid intraday volatility, which means one should defer exit decisions until the weekend or until support is breached by several percentage points.