The Traditional Stock Trading Methods

Traditional trading methods analyze stocks in different time frames:

However, the problem is that standard technical analysis, based on end-of-day (EOD) data, does not work properly in today's new environment. Indeed, in the last few years, the stock market has seen dramatic changes, but none of the present tools deals with such changes.

1. Volatility
Volatility has increased because more traders have instant access to information and therefore can (and do) react instantly to news. The sheer mass of trades has the potential to abruptly move the stock price in one direction or another. Upwards momentum can therefore quickly build up and turn into exuberance, while downwards momentum can feed the start of a panic selling movement

It is critical to compare the evolution of both price and volume changes over very small time intervals, for two reasons:

2. Decimalisation
Since April 9, 2001, all the major US stock exchanges converted their quotation systems from fractions to decimals. This process was called decimalisation. The smallest spread between the Bid and the Ask, or the smallest price change moved from $0.0625 (1/16th) to $0.01. Decimalisation had very significant consequences on the way funds enter or exit positions. To know more, click here.