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- Ignore carolynandjoel
|9/7/2005 10:35:45 AM
You folks have been so helpful in the past with filter development, that I thought you might help me with a more general question. I will try to articulate it in such a fashion as to make it more answerable. Forgive me if this is out of the purview of this group.
I currently have a list of nearly 50 filters that I review nearly every day looking for possible trades. However, after "evaluating" a myriad of selected stocks, I usually end up with no stocks that I would want to trade.
Could you suggest a direction for me? Perhaps I should focus on better filters, or maybe my secondary evaluation process is too stringent, or could this dearth of tradeable stocks be a reflection of market conditions. (BTW, I tend to go long or be in cash. My shorting skills are poor and I tend to shy away from that side of the trade.)
If any of you have any thoughts about the next direction I should focus my attentions, I would be very grateful.
PS - As per TRO's comments, I am considering upgrading my SF membership so that I may have access to his advanced input.
- Ignore Koronbock
|9/7/2005 4:39:24 PM
looks like you are suffering from "information overload". It has been said (I think from Rump, our greatest contributor here)that he and Muddy (another great trader) are "one trick ponies". This is great wisdom!
Sometimes great traders are using only one or at least VERY FEW indicators. But they know their behavior and the intricacies extremely well, out of a long experience. This comes from years of trading, watching charts, reading...
In trading, LESS is often BETTER. If you have so many indicators, then most of them will be redundant anyway: They measure the same thing, expressed differently.
Rump is advocating a very low RSI(2) as a simple basic indicator and it looks like he is VERY successful with it. Others use moving averages or stochastics. I recommend using an indicator you like, that fits your trading style and time frame and watch it carefully over all kinds of market situations. Soon, you get a "feel" for it and its behavior.
After some good "weeding", you can turn to the BACKTESTING feature and see objectively how your filter would have panned out. Hope this helps.
- Ignore AMSERVE
|9/7/2005 7:57:47 PM
Here's a thought you may want to consider. It can solve the problem of stock selection.
Personally, I use a total of 20 filters. I have constructed them as 10 "pairs". each pair is a mirror image if itself - one long and one short.
For example, if one filter looks for stocks where the weekly RSI has broken above 10, it's mirror image will look for stocks where the weekly RSI has broken below 90.
I simply look for where the largest number of stocks are showing up. If, over a couple of days, 3 to 5 times more stocks are selected in the "long" filters, as opposed to the "short" filters and a look at a some charts confirm that the market seems to be at a support level, it's fairly safe to assume that stocks are in a rally mode (I had one day a couple of months back where the long/short ratio was 40:1). When this happens just go long one of the proxies for the market (QQQQ, SPX, DIA, ETF of your choice, or whatever). You won't catch the absolute bottom or top this way but you should be catching the trend fairly early (Remember - ALWAYS protective stops).
As the market rises, fewer and fewer stocks will begin to show up, it may be time to take some profits and go to cash (if you haven't hit a target price yet). At market turning points you will find that the total number of stocks selected, whether long or short is very small.
The same process can be used for going short and by using the market substitutes you will most likely avoid catastrophe. By the way, it's been my experience that profits from short positions can come quite a bit faster than from long positions.
This type of trading takes some patience as these set-ups tend to show up every 4-6 weeks and you can expect to hold these positions at least half of that time. If you have a daytraders mentality and a bundle of fast-twitch muscles in your trigger finger you will get bored quickly. We aren't talking about major moves here, 5%-10% is typical. It has become, however, the most reliable method I've found yet for consistently making some money while at the same time limiting risk.
If you need more action than this, you can always trade this same way but look at the options on these securities.
P.S. Just an afterthought, I also tend to ignore any gold stocks. Just subtract them from your totals. Ditto with penny stocks. Or just construct your filters to select stocks above $10.00 for example.
- Ignore rtucker
|9/8/2005 4:53:16 AM
I had to do the following to change the way I behave in the market.
Others can certainly disagree or weigh in but it helped me.
I too used IBD for years and watched markets and stocks whiz by me, trading infrequently and certainly not in any kind of sync with the market.
Now, I only use SF, no fundamentals. I cant pick apples or googles so I dont bother doing it at all, because, it would paralyze me again. News that breifly moves stocks is another matter, but, I've yet to find a way to incorparate this into foresight or even real time.
Here is the main thing I want to say. Trade multi-positions very small! If you look at a chart with the settup you like from a filter that is in a 50/50 or better mode (market uptrend) for more than 5 minutes, maybe, cut your position in half and repeat until you can buy it. Remember RO's comment about no one knowing what a stock will do tommorrow. "Borrow" 1 filter from someone at SF and adopt it. Run it through "buy hand" (looking at every chart) from 8/1/2004 to now and feel it. By feel it I mean see how it changes with the market(as AMSERVE stated), and, your'e not going to get all that red ie: 5(-15) when you get stopped out. Look at them as say 5(-3). You must look at the green like that also in terms of your exit plan. Also, I have a light transparancy of qqqq that I post on my screen as I look at hundreds of charts a year back (nuts huh..)
As for which type of filter to "borrow" I feel strongly that it be a simple oversold filter, ( choose your volatility and timeframe), so that you get in phase with the market and get an amplified result. IMO IBD's new high breakouts backtest lousy. I know; its in the fundamentals, sector, and the quality of the base. Thats easy!
As for the market, see the turning points over the last year. Also, see the turning points(pontential ones in my opinion)that failed. Just like RO said no one realy knows these either. In my opinion, there was no reason for the market to go up in May other than it was oversold. I think its more painfull to miss a rally than it is to be active, scale in small, and get stopped out as the market tumbles futher. I'm still sort of winging this aspect, and, am usually to soon , but, put a gun to my head and I'll use ma(10).
The above philosophy did get me started Carolyn. Trading isnt pretty, but, surprisingly a lot of the time it dosent have to be. This isnt a method to make money fast if at all. The idea is to risk small money, survive( you might surprise yourself), make a good number of tades to get statistics on your trading( wins/losses, avg win%/avg loss%) etc... IMO "very small money" is to risk .25% max of your total "trading" equity per trade.( If youre trading equity is a fraction of your total equity you may want to find other plans for "non trading" equity for a period of time). I know .25% is real small but the point is to get in the game. Typically, according to the books I have read, good traders risk 4 to 8 times as much per trade. Incidentally, IBD's plan of 6 stocks at 7-8% loss is risking about 1.3% TE per trade.
- Ignore TheRumpledOne
|9/9/2005 12:01:50 AM
Buy at/near support.
Sell at/near resistance.
See my GRIDIRON trading strategy. It grinds out the profits.
MAY ALL YOUR FILLS BE COMPLETE.
- Ignore nikoschopen
|9/9/2005 3:31:15 AM
What Rumpie says is a truism that bears repeating IMHO. You can use all the fancy filters as you possibly can muster, but without a firm grip on where and when the stock (or futures) will stall, any claim to success is limited. Get to know your S/R (support & resistance), trendlines, and the moving averages (especially 20-, 50-, & 200-day) very well. You'd be amazed how many times a given stock bounces off these important landmarks. Only then should you even bother with stoch, RSI, MACD, or what nots to fill the missing gap, namely the psychology of the market.
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