Stop Investing and Start Trading. How I Trade Technical Strategies Over Fundamental Strategies

Transcription

1 Stop Investing and Start Trading How I Trade Technical Strategies Over Fundamental Strategies

2 PREPARATION PRIOR TO OPENING MARKET 1. On Daily Log Sheet record NAV [Net Asset Value] of portfolio. 2. Note exact cash. Note percent cash position relative to whole portfolio. 3. Note percent of positions where price>price at purchase. 4. Review each chart in portfolio.

3 REVIEW EACH CHART 1. Print copy of portfolio and place in log. 2. Check each chart for bracket. a. Is the stop at the desired price? b. Is the target at the desired price? c. Change bracket before market opening. d. Move brackets up as market moves up, if you are long. Opposite if shorting. e. NEVER HAVE A LONG POSITION WITHOUT A STOP EVER!

4 PLACING BRACKET 1. Place stop at 4.5% below purchase price. Place horizontal line on chart. 2. Place target at upper Keltner Line or on the trend line of higher highs, if stock is trending up. 3. NEVER FUDGE THE STOP DOWNWARD.

5 ESTABLISH THE PULSE OF THE MARKET 1. Use the Wilshire 5000 Index. 2. Array Monthly, Weekly, Daily, 60 Minute and 10 Minute Bar Charts. 3. Assign value to each time frame: a. I if uptrend. [Three green bars in a row]. b. II if a top [One red of three bars]. c. III if down trend [Three red bars in a row]. d. IV if flat after down trend. [Red/green mix].

6 PULSE OF MARKET Monthly Bar Chart Sept 4 Read II

7 PULSE OF MARKET Weekly Bar Chart Read II

8 PULSE OF MARKET Daily Bar Chart Read IV

9 PULSE OF MARKET 60 Minute Bar Chart Read II

10 PULSE OF MARKET 10 Minute Bar Chart Read IV

11 COMPARE TIME FRAMES

12 RECORD PULSE IN LOG 1. For prospective long term positions, check monthly, weekly, daily chart. 2. For short term or swing trades check, weekly, daily and 60 minute chart. 3. For day trades, check daily, 60 minute and 10 minute chart. 4. At close of trading day or next morning, check your prediction. Keep a record!

13 STANDARDIZE TRADING CHARTS WITH INDICATORS 1. Keltner Channel. 2. MACD. 3. Moving Average Exponential. 4. Parabolic SAR. 5. Stochastic Fast. 6. Set computer so all charts come up with standard appearance.

14 PRIOR TO MARKET OPENING 1. Check Day Trading Charts. 2. Stops under open positions? 3. Select charts for possible trades.

15 KELTNER CHANNEL The Keltner Channel indicator is used to identify overbought / oversold conditions as well as the trend strength of a market. When an asset s price is closer to the upper band than the lower band, the market is considered overbought. Conversely, when an asset s price is closer to the bottom band than the upper band, the market is considered oversold. An advantage of Keltner Channel analysis compared to other indicators used to analyze trend strength is that market lag is not as pronounced, because Keltner Channels are extremely sensitive to fluctuations in volatility. 94% of all prices fall within Keltner Channels.

16 Chart with Keltner Channel Oversold/Overbought Indicator

17 MACD The Moving Average Convergence Divergence indicator calculates 2 exponential moving averages of the lengths specified by the inputs FastLength and SlowLength. The difference between these 2 averages is then plotted as the MACD. This value is also averaged for the number of bars specified by the input MACDLength and then plotted as the MACDAvg. Finally, the difference between the MACD and the MACD average is calculated and plotted as the MACDDiff. As a trend-following indicator, the MACD may be interpreted similarly to other moving averages. When the MACD crosses above the MACD Average, it may be the beginning of an uptrend. Conversely, when the MACD crosses below the MACD Average, it may be the beginning of a downtrend. As an oscillator, the MACD can indicate overbought and oversold conditions.

18 Add MACD Indicator Trend indicator

19 Exponential Moving Average The moving average may be the most widely used indicator. The Mov Avg Exponential indicator calculates and plots an exponentially weighted average of prices, specified by the Price input, from each of the most recent number of bars specified by the Length input. This method of calculating a Moving Average gives greater weight to the market s most recent price and a reduced weighting to older prices. (A simple moving average gives equal weight to all the prices in the series.) A moving average is generally used for trend identification. Attention is given to the direction in which the average is moving and to the relative position of prices and the moving average. Rising moving average values (direction) and prices above the moving average (position) would indicate an uptrend. Declining moving average values and prices below the moving average would indicate a downtrend.

20 Add Exponential Moving Ave Trend Indicator

21 Fast Stochastic Indicator The Stochastic Fast indicator calculates the location of a current price in relation to its range over a period of bars. The default settings are to use the most recent 14 bars (input StochLength), the high and low of that period to establish a range (input PriceH and PriceL) and the close as the current price (input PriceC). This calculation is then indexed and plotted as FastK. A smoothed average of FastK, known as FastD, is also plotted. FastK and FastD plot as oscillators with values from 0 to 100. The direction of the Stochastics should confirm price movement. For example, rising Stochastics confirm rising prices. Stochastics can also help identify turning points when there are nonconfirmations or divergences. For example, a new high in price without a new high in Stochastics may indicate a false breakout. Stochastics are also used to identify overbought and oversold conditions when the Stochastics reach extreme highs or lows. Additionally, FastK crossing above the smoother FastD can be a buy signal and vice versa.

22 Add Stochastic Fast Indicator An Oscillator with value from 0-100

23 Parabolic SAR INDICATOR Market Synopsis The Parabolic SAR indicator, based on Welles Wilder s Parabolic Time/Price Strategy, is based on the relationship between a market s price and time. It is used to determine when to stop and reverse (SAR) a position utilizing time/price-based stops. Once a Parabolic SAR is reached, the current position is exited and a new position in the opposite direction is taken. It is primarily used in trending markets and is based on always having a position in the market. The indicator may also be used to determine stop points and estimating when you would reverse a position and take a trade the opposite direction. The indicator derives its name from the fact that when charted, the pattern resembles a parabola or French curve.

24 Add Parabolic SAR Shown here by itself for clarity.

25 PRIOR TO MARKET OPEN 1. Check Charts of Day Trading Open Positions. Be sure stops on ALL. 2. If trading in a margin account, note buying power [BP] available at open. 3. Check ticker for stocks on the move a good source for day traders. 4. Trade these BEFORE OPEN. 5. Have list of all prospective trades ready. 6. Do research and analysis before trading day. Use trading day for implementing plan and monitoring and managing positions.

26 THE MARKET OPENS 1. Monitor the non-day trade portfolio after the first hour of trading and readjust brackets for each chart, if market moving up. 2. Monitor: a. Sector website [ for sector leaders for day, week, month. b. Map of the Market [ for day s activity.

27 WHAT I TRADE 1. The pool is made up of Stocks, ETFs, Bond Funds, ADRs and Currency Funds on US Exchanges only. 2. Pool is maintained under following categories; a. Basic Agriculture. k. Finance. b. Bond Funds. l. Gaming. c. Bulk Shipping. m. Gold. d. Commodities. n. Health. e. Consumer. o. Infrastructure. f..countries. p. Leisure. g. Currency q. Materials. h. Dollar. r. REITS. i. Energy. s. Tech. j. ETFs t. TIPs. u. Yield.

28 SOURCE OF THE POOL 1. Barron s Recommendation. 2. Select leaders from Sector Tracker 3. TradeStation Hot Lists 4. Investors Business Daily [IBD]. a. Stocks on the move. b. Screen of the day. c. Top sector performers. d. CAN SLIM SELECT. e. Tech Leader. f. International.

29 CAN SLIM SELECT The CAN SLIM Select stock list tracks market-leading stocks that in general show strong earnings growth, positive institutional sponsorship, excellent industry strength, and solid sales growth, profit margins and return on equity. Stocks must also meet minimum price and volume levels Read More At Investor's Business Daily: Follow on Twitter InvestorsBusinessDaily on Facebook

30 MY 7 TRADING STRATAGIES Buy the OVERSOLD POINT. 1. On a TREND chart. 2. On SINE pattern chart. 3. On PENNANT pattern chart. 4. On RECTANGLE pattern chart. 5. On DOWN pattern only at end. 6. On DIP pattern special situation. 7. At bottom of market. 8. Weekly chart more important than Daily.

31 TECHNICAL RULES for 1.Trend Strategy Find oversold price on weekly bar chart

32 TECHNICAL RULES for 1.Trend Strategy 2. Confirm oversold price on daily bar chart.

33 2. SINE PATTERN STRATEGY

34 SINE PATERN ALSO A TREND ON WEEKLY CHART Note moving averages.

35 3. PENNANT PATTERN STRATEGY Note how SAR indicator is complementary

36 4. RECTANGLE PATTERN STRATEGY Look for lowest points in rectangle

37 5. DOWN TREND STRATEGY Wait for pulse of the market to turn I

38 WAIT FOR OVERSOLD POINT Four points over 2 ½ years

39 6.Oversold on the DIP Strategy Bad things happen to good companies

40 7. BOTTOM STRATEGY Monthly chart helps define bottom

41 MONITORING BOND MARKET Pimco Corporate Bond Fund as indicator

42 EXAMPLE TRADE ROUTINE KMP [Kinder Morgan Energy Partners] Oversold buy point in RECTANGLE. Confirmatory information. a. IBD RATING. b. Yield confirmed. Use MSN Money site. c. Analysts rating. Place Limit Order. Go to Market order, if it does not fill. Check Matrix for decision. Place bracket immediately.

43 KMP [RECTANGLE STRAGEGY] Note Oversold Point

44 IBD RATING [ 58 out of 100. About KMP: MLP ENGAGED IN THE OWNERSHIP AND MANAGEMENT OF ENERGY PERFORMANCE WITHIN GROUP (KMP) KINDER MORGAN ENERGY LP RANK WITHIN THE OIL&GAS-TRANSPRT/PIPELNE GROUP (59 STOCKS) Composite Rating 58 Rank within Group: 15th 76% EPS Rating 76 Rank within Group: 12th 81% Relative Strength Rating 32 Rank within Group: 52nd 13% SMR Rating A Rank within Group: 4th 94% Acc/Dist. Rating C- Rank within Group: 32nd 47% Read More At Investor's Business Daily: Follow on Twitter InvestorsBusinessDaily on Facebook

45 Yield Confirmed/ Analysts Rating Yield= 6.57% Source: Analyst Rating= Source: ts/analyst-ratings/?symbol=kmp

46 TRADE PLACE LIMIT ORDER PLACE ORDER BELOW MARKET

47 RECORD ON CHART Bracket placed on trade

48 WHEN TO SELL 1. Automatic when price hits TARGET. 2. By choice if Pulse of Market changes sell or move stop up very tight in which case bracket remains in place or market deteriorates and stop out occurs. Use 60 min or 30 min chart for precision. 3. Automatic when price hits STOP.

49 RECORD MONTHLY TRADING RECORD Use EXCEL SPREAD SHEET. RECORD: Date Symbol Purchase price Sale price Number of shares Gain or Loss %Gain or Loss Days Held Strategy Used

50 Monthly Homework Review Pool at start of each month. Place oversold prospects in Month Tab. Use Month Tab to select trades.

51 EDUCATION TRADERS WORLD Two international meetings each year. October in Las Vegas and February in NYC. Faculty of lecturers Book Mart. PLATFORM TUTORIALS Each trading platform has tutorials to allow progressive improvement. Consultants to answer questions such as flash crashes

52 WHERE IS THE FRONTIER? 1. Index Trading 2. Program Trading 3. Advances in Trading Platforms; TradeStation. Charles Schwab. Interactive Traders E-Trade [Think or Swim. Chart services: StockCharts.com and tradingview.com

53 TRADING HISTORY : Large Cap Buy and Hold. Keogh Plan 72-78: Fiduciary Trust NY.[4% per year] : Buy and Hold Tech +NY Bonds : Eggs-in-one-Basket and conversion to Roth IRA Diverse + Preferreds+Bonds with 8 % stops. Partially advised [Lord Abbott]. 2008:Out of Market 6 months. Avoided 25% of crash : Evolution of Present Trading System. 2013: Yield 7%+ with disciplined strategy described.