Why Weekly Charts Are Worth Trading From:
With the start of another trading week, it’s the perfect time to take a look at trend following trading strategies, using weekly charts.
Because in my experience…
Trading from weekly charts makes it much easier to catch BIG market moves.
And these massive week or month long trends can really have a positive impact on your bottom-line profits!
Trading with weekly charts also smooths out most of the random noise you see on shorter timeframe charts. Why is this good?
Well, it means that not only can you get more clear entry and exit signals; but, you’ll also experience fewer whipsaws.
And here’s the thing…
Even if you’re a short term day trader or swing trader, you can still drastically improve your trading … (and your confidence)… by taking a minute to look at the big picture perspectives weekly charts provide!
Just as I explained in my recent article about trend following with monthly charts, by zooming out before placing your trade, you can give yourself an advantage that most other short term traders are missing.
And what’s not to love about that?
Let’s get into the details of trend following with weekly charts so you can improve your odds of stock market success. Sound good?
The Big Picture Benefits of Trading Weekly Chart Trends:
Let me be honest with you…
I find it shocking how few day traders and swing traders ever glance at weekly charts.
And don’t get me wrong:
I understand how you can get bogged down in 5-minute candlesticks and 30-minute trend lines.
Taking a quick look at the weekly charts can be critical to your long term stock market success.
This long-term view can help you easily identify the major trend that’s playing out in the specific stock, (or market), you’re thinking of investing in.
The famous trader Jesse Livermore used to call this the line of least resistance. And I think that sums it up perfectly!
Again… even as a short-term trader… don’t you want the odds in your favour like this?
Just look at the weekly stock chart below…
Can you see how the weekly chart would inform your short-term trading bias?
As I mentioned…
The beauty of these weekly charts is that you get a great view of the major trend.
I find it much smoother than daily charts because the weekly candlesticks smooth out the volatility, and can help you stay focused on the longer-term trajectory of a company.
When you know where a stock has come from, you can get a better sense of where it’s going!
And it doesn’t just work for uptrends!
Looking at weekly charts can also help you avoid buying beaten down stocks in downtrends that are likely to keep going lower.
As they say: “Cheap stocks are usually cheap for a reason!”
Using weekly charts to act as a trend filter is especially helpful for value investors and contrarians who are eager to catch falling knives.
By simply avoiding stocks in a steep downtrend you can better put the odds in your favour.
… But how do I know this?
It’s because… for me personally… I started my stock market career as a value investor, looking for under-priced investment ideas.
Unfortunately, this often resulted in finding stocks at 52-week lows, and waiting for them to turn around.
And let me tell you…
It was no fun at all to buy losing stock picks and watch them wallow at new lows.
I would wait patiently each quarter for management conference calls and updated EPS result. But…
Unfortunately, more often than not I was disappointed.
Just look at the chart below for a second:
No matter how undervalued a company is, would you really want to own it when it’s in a downtrend like that?
So… instead… out of sheer need:
I eventually started using weekly charts to help me focus on quality companies that were undervalued AND starting to trend upwards on a weekly basis.
This alone dramatically improved my results (and my peace of mind)!
It also sped up my investment decision-making process so managing my portfolio went from hours a day to under 30 minutes/ day.
Instead of pulling my hair out wondering when a company would turn around, I just let the charts be my guide.
After all… if you want to make money in stocks…
“You need to buy stocks that are going UP in price!”
Pretty simple when you think about it, right? Right.
But you know what?
There are some great other things you can use weekly charts for too!
Let me explain.
How to Catch Big Market Breakouts with Weekly Charts:
Trading with weekly charts isn’t just about finding big uptrends and avoiding downtrends (although that’s definitely part of it).
But… in addition…
You can also use weekly charts to find massive charts patterns that could portend an even bigger breakout!
With weekly charts, you can easily see if a stock has been hitting up against resistance for months, quarters or even years on end.
When these long-term breakouts eventually do happen, the weekly charts are the easiest place to see them.
Case in point:
On a daily chart, you might not see the bigger picture. But with a weekly view, the size of the potential breakout becomes more clear.
And keep in mind…
These are typically stocks that are consolidating for months (or even years!) on-end.
“The breakouts from these consolidations can also last for MONTHS at a time!”
Of course, not every pick is a winner. But…
If you can manage to catch a few big trends like this each year… well… then you can really start to get some traction in your account.
Because a few big winners will pay for many small losses… and more!
By coming up with a trading system that incorporates this bigger picture weekly view, you can make your life much easier.
It’s almost like top-down trading, but using time instead of markets and sectors to help inform your decision-making.
So… no matter what your trading or investing style… I recommend you think about the different ways you can incorporate weekly stock charts into your trading and analysis process.
But all this aside, there’s another huge benefit to trading weekly charts, which I’d also like to share with you.
So keep reading to find out what it is!
Learn the Biggest Benefit of Trend Following With Weekly Stock Charts:
By now, I hope you’re starting to see the important role weekly charts can play in your trading analysis.
You see… with longer-term weekly charts…
You can easily grasp how they help you identify the major trend to inform your bullish or bearish bias on shorter time frames.
And you can also see how weekly charts smooth out the signal to noise ratio and short term volatility.
But let me tell you my favourite thing about weekly stock charts.
Because at the end of the day…
The biggest benefit of trading from weekly stock charts is that you end up placing smaller position sizes and wider stops.
“With weekly charts you reduce your chances of over-trading!”
As I’ve said before, overtrading is one of the WORST mistakes traders make. Especially new traders (who tend to think more trading activity leads to accomplishment).
It’s not often talked about. But over trading is responsible for chopping up the brokerage accounts of countless traders.
Between commission costs and slippage, over-trading can erode your bottom line before you’ve even realized what happened!
Not too mention…
The endless decision-making can be tiring and lead to emotional burnout… which… can lead to even more mistakes!
That’s why I love weekly charts. They really help you take a step back and avoid getting in your own way. Just trade patiently and let your system do it’s thing.
Now, although we’ve covered most of the benefits of trading with weekly charts, there’s something you still might be wondering….
Where’s the Best Place to Find Weekly Stock Charts?
I’d hate to write a detailed post about weekly stock charts without showing you exactly how to find these charts for free online!
So just to recap…
While your broker probably provides a charting function with weekly charts, my favourite free online tool to use is StockCharts.com. Why?
At the end of the day, StockCharts.com has a great free product. It’s easy to use, and simple to read.
So to access this weekly view, just head over to StockCharts.com and type in a ticker of interest. Then…
You’ll be presented with the default daily chart. From there, you’ll notice you can click the time period drop down menu (beside the ticker field) and change it from “Daily” to “Weekly”.
Just to be clear, here’s what it looks like:
And there you have it!
Exactly. But even better news is that most mobile trading and charting services, as well as desktop charting platforms all provide weekly charts you can use to augment your stock analysis.
In particular, some of my other favourite online charting tools that provide weekly charts include FreeStockCharts.com, TradingView.com and Technician (formerly ChartIQ).
Now I know that was a lot to read. So if you’re more of a visual learner, I also wanted to create something for you.
That’s why I created the Video below about trading weekly stock charts. It includes the 2 key benefits of trading from weekly charts. And it includes some examples to help illustrate the point.
See for yourself!
Trend Following Breakouts with Weekly Stock Charts [VIDEO]:
Well, here you go, watch this video to answer any final questions you might have about trading breakouts using weekly stock charts. Cool? Cool.
Now, I hope that by now you have all the information you need on why you should trade weekly charts, plus the free online tools to do it.
But just in case that’s not enough… well… feel free to keep reading.
More Weekly Chart Trading Resources:
You can bet that if there’s stock market information of value… chances are… other people have written about it.
And lucky for you… weekly charts are no exception! So here’s some intriguing further reading about the art and science of trading with weekly charts:
To conclude, I hope this article has given you everything you need to know when it comes to using weekly charts for your trading and market analysis.
And if you’re still looking for more information on how to build a great trading system, I encourage you to fill out the form below. I’ll send you my favourite stock picks each week as well as the thinking and strategy that I use to find them. Curious? Then sign up below and I’ll see you on the inside!