So what’s your next step? Research a completely new trading strategy, right? Not yet, I say. If you are already trading a profitable strategy, many times there are ways to improve, adapt, or add on to it to make more profits – sometimes a lot more. So before investing a lot of time in developing a completely new strategy which can be a long and arduous process, first look at the strategy you already trade.
This has a couple of obvious advantages – you’re already intimately familiar with how your system works and you already have a mountain of real, live trading data to test with which is always more valuable than pure backtesting with is 100% theoretical.
Here are some ways to look at your existing system to try to improve it:
Use a Profit Target – Look for ways to add a target order or modify an existing one. Targets are great for a lot of strategies because they lock in profit and they free up capital sooner.
Adjust Your Stops – Most traders use stops that are too tight. Look at your existing strategy and see if you can make more money by using a larger or smaller stop distance.
Find More Opportunities – If you’ve already got a profitable strategy, it often pays to relax your filter rules to generate more entry signals. Even if you end up with a strategy that is slightly less profitable per trade, the increased opportunities could be well worth it.
Look For Fewer, More Profitable Opportunities – This is the opposite of the previous item. It might make sense to trade fewer but more profitable opportunities by tightening your entry criteria a bit. Often times you’ll find that you can make the same amount of money with fewer trades (and therefore less risk). This can free up valuable buying power to allocate to other strategies.
Automate your Strategy or Part of It – How are you spending your time when you trade your strategy? Are there aspects of that routine that could be streamlined or eliminated? Perhaps the strategy could be completely automated. Maybe the strategy can be modified slightly to be automated.
Look For Cheaper Commissions – If you’re trading big enough, this could save thousands of dollars a month. Changing brokers can be a pain, so make sure the pay off is going to be worth it before going through the hassle of moving money, learning a new platform, etc.
Backtest Losing Trades in the Opposite Direction – Let’s say you’re trading a long strategy and 40% of those trades end up stopping out. What would happen if you took those trades that stopped out and traded them short? Think about it – the trades that stop out have invalidated your long “thesis” with your original strategy. Maybe there’s an edge on the short side with those trades.
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asr: it seems this TRIX works on short time frames 3-min , 5-min charts
TRIX Reversal trading system
-- see detailed pages with charts on this trade follow 1-8 on this web link
* Description : The TRIX (T) is a comparison of the current and previous triple smoothed exponential moving averages.
* Calculation :
EMA1 = EMA1n-1 + ((2 / (n + 1)) * (Pn - EMA1n-1))
EMA2 = EMA2n-1 + ((2 / (n + 1)) * (EMA1n - EMA2n-1))
EMA3 = EMA3n-1 + ((2 / (n + 1)) * (EMA2n - EMA3n-1))
T = (EMA3n - EMA3n-1 ) / EMA3n-1
Trading Use
The TRIX is usually used as an oscillator, with long and short entries signaled by the TRIX crossing its zero line. It can also be used as a divergence indicator, with long entries signaled by bullish divergence, and short entries signaled by bearish divergence.
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What Is TRIX?
The triple exponential average (TRIX) indicator is an oscillator used to identify oversold and overbought markets, and it can also be used as a momentum indicator. Like many oscillators, TRIX oscillates around a zero line.
- If we look closely at some of the other momentum indicators like a stochastics or a price ROC, we would find a similar pattern.
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Excellent Example of Intraday Reversal Preceded by Divergences
This morning’s action gave a great example of the “Divergence” lessons, in that dual TICK and Momentum divergences can forecast intraday price reversals of either short or intermediate term degree. Let’s take a look.
Two Quick Intraday Fibonacci Retracement Examples
Today’s intraday price action gave me a chance to show you two specific Fibonacci Retracement grid examples of how to use the “Fibonacci Retracement” tool to find potential trade entries or reversals in price. Let’s take a look at them and learn how to use this tool.
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Much to learn from these charts
http://www.chartswingtrader.com/search/label/Charts
-- see 4 charts showing 9/20/50 ribbon same direction ..
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Determining market trend:
asr: seems we need to subscribe to this guy blog stockbee as he is more vocal (talking ) about market trends.
- Subscriptin: this $150/year should be tried given he has setup and 'market monitor' for daily commentary. see below as shown on this page.
He shows montly retruns of 20% atleaet in 7,8 months of 2009 see table . He has trade alerts that may be value of $150 , endorsed by swingtrader ..
- May be Mr. K may be using this blog it privately ...
How to determine market direction using market breadth
Market Monitor the market direction indicating system based on market breadth. Everyday a detailed analysis of market action and direction is done using 13 market breadth based parameters. Based on it a probability of market direction is determined. There is a extensive discussion about market breadth and how to use it to determine market directio
http://stockbee.blogspot.com/2007/06/how-to-find-shorts.html
#2 - Stockbee Market Monitor
Another great resource useful for market direction is from the blog of Pradeep Bonde, Stockbee. I found this blog a year or so ago and it is a tremendous resource for traders. Using Telechart, he has developed a series of scans that keeps track of four or five ratios that help traders determine the underlying trend and anticipate near-term moves. Out of respect to him, I will not comment much more on these scans, but I encourage you to check out his website and learn for yourself. He also offers a subscription site for traders interested in learning more strategies including his Market Monitor. I keep track of theses ratios through Telechart on a daily basis and make many decisions based on the numbers I get. One gives a broad, overall indicator of the market, while others give shorter-term signals when the market is extended and due to pullback, or when the market has possibly put in a short-term bottom.
asr: so you can save data in telecharts and track it over period ..
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Stock Scans for LONG BUY stocks
http://www.chartswingtrader.com/2008/04/how-to-find-stocks-using-telechart.html
I have matching watchlist for short candidates if the market conditions are weak, a watchlist for the general indexes and some Telechart indicators I use, and an IBD Stocks watchlist that contains the IBD 100 and Top 200 Composite stocks from the past week.
My first scan is the most basic - it is called Price/Volume and is looking for stocks above their 50 and 200 day moving averages that are up for the day on volume that is at least 50% higher than the normal average daily volume. The basic PCF for this scan is as follows:
(C > C1) AND (C > AVGC50) AND (AVGC50 > AVGC200) AND (V > 1.5 * AVGV50) AND (AVGV50 >= 200) AND (C > 4)
I put this PCF in an easy scan and scan all stocks in the system. There is a minimum price and minimum volume component already in this scan. This scan typically presents 20-60 stocks per day in good market conditions, and I can often find stocks forming possible bases using this scan that I then put in my Long Watchlist. I believe I got this scan from the Mauitrader blog of Joshua Hayes.
My second scan is simply a breakout scan that screens for stocks up 4% or more on higher volume. This scan comes from Pradeep Bonde from Stockbee and is part of his Market Monitor. The PCF is as follows:
( 100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1
I also put this in an easy scan and scan for all stocks. There is also a price/volume minimum in this scan. I sometimes find different stocks in this scan than the price/volume scan above due to the requirements for increases in volume. The reason this scan works well is that it helps show which stocks are moving higher in a powerful fashion and prevents me from missing one of those stocks on their journey higher.
My final scan is one I developed based on the Balance of Power indicator (BOP) I like to use when viewing charts in Telechart. I call it Max BOP, and it basically looks for stocks that above its 50 day moving average and has BOP levels of at least 70. This scan will show me which stocks have the most accumulation in their charts, and although often I see the same stocks in all of these scans, this helps point me to the ones with the most momentum behind them. The main PCF is below:
BOP1 >= 70 AND (C > AVGC50) AND (C > 4)
I put that PCF in an easy scan and then scan all stocks and put a volume requirement in with the easy scan. I will get a lot of charts in this scan and I manually scan them to see if there are any attractive candidates I missed on the first two scans.
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Updated Short Scan for Telechart
I have been tinkering with my main short scan in Telechart for the past day or so and the charts that I am getting from this updated scan are closer to what I am looking for in a short, so for those interested, here is the updated Easy Scan with PCF's:
PCF #1 - Down 15% in last 25-30 Days, but up at least 5% in last 5-7 days.
100 * ((C + .01) - (MAXC7 + .01)) / (MAXC7 + .01) <= ( 5) AND 100 * ((C + .01) - (MAXC30 + .01)) / (MAXC30 + .01) <= ( - 15)
I have tinkered with the number of days from 25 to 30 and also 5 to 7 and this seems to work well, although you can try to change them for your own preferences.
PCF #2 - Short Scan - Within 5% of 50 day moving average.
C >= (AVGC50 * .95) AND C < (AVGC50 * 1.05)
PCF #3 - Volume Decreasing on Rally
AVGV7 < AVGV
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How I find Shorts
I also created an Easyscan in Telechart that helps identify stocks that have rallied up close to their 50 day MA. This scan is by no means perfect and I continue to tinker with it, but each day it gives me another 30 or 40 candidates to look through each day to check as possibilities. I created a PCF and called it short scan. The scan is as follows:
C >= (AVGC50 * .95) AND C < (AVGC50 * 1.05)
This gives me stocks that are within 5% of their 50 day moving average. From there I add that condition to an easy scan and also include the following conditions;
Watchlist: All Stocks
Price Growth Rate, 1 Year: Rank 55 to 99
Price Percentage Change 26 Week: Rank 6 to 62
Volume 1-Day: Rank 51 to 99
Price Per Share: Rank 16 to 99
Price Percentage Change 5-Day: 75 to 99
asr: wow with Telecharts you can do this Ranking, I do not think you can do ranking with TradeStation.
What this scan basically gives me is stocks that are up or flat on the year, have gone down at least five percent over the last 26 weeks, and whose price has not gone down the past five days or has rallied, as well as being within 5% of their 50 day moving average. This scan gave me BID as a possibility last week, and COH as a possibility a few weeks ago.
Unfortunately, I did not take either because I was too busy trying to be a hero shorting solar stocks. I didn't lose more than a few percentage points on each short, so it was not a big deal, but it does bring me to my final point - only short weak stocks. I debated between taking BID and TSL last week and went with TSL. I was stopped out that day. So I still need to work on my discipline with shorting. Short weak stocks. Short weak stocks. Short weak stocks. I can't say that enough, and maybe I am saying it so many times to get it in my head too.
asr: main points in these 3 charts
1) Money stream did not move up even though stock price moved that is bearish sign
2) decreased volume trend
3) see with Telecharts you can have colors for 9/20/50 moving avg. crosses good visual indicator .
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How to trade earnings
Double Trouble is a very simple relative strength system. One of the unique things in it is that it uses absolute strength instead of relative strength. Stocks has to double before being considered for a trade. In relative strength, one just ranks stocks by annual rate of return and takes the top 10% or so.
However many of you have trouble finding a software to do the exact calculations for Double Trouble. The other problem you face with Double Trouble is many possible opportunities on day to day basis. To overcome such problem here is a modified Double Trouble method. I can not think of a new name for it currently, but at some stage will rename it.
This is extremely Telechart friendly version.
1. Calculate relative rank using : ((C - AVGC135 ) / AVGC135)
2. Take the top 2% stocks ranked by the above scan.
3. Run a combined month weakness plus breakout scan on the top 2% stock. :(100 * (C1 - C22) / C22) < 10 AND ( 100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1
4. You will get 0 to 5 candidates on daily basis. If you want even lesser number of candidates take 1% only in step 2. In that case you will get 0 to 3 candidates on daily basis in most circumstances.
5. Initial stop at 3 days low. Trail after 20% profit with 10% stop.
6. Risk 1% of equity.
Do your own testing before trading. You will not miss out on major profitable rally. Enjoy your profit.
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Some Review on trades and psychology , real good one from March 2009
asr: I should have read and interacted with these kind of guys in March/April 2009 so that I should have seens S&P treend and OIL up trend.
-- see nice 4 crisp charts, I would have kept for OIL 5 min, 15 min, 60 min, daily OIL chart side by side all in one screen
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