Registered User
Joined: 9/21/2005
Posts: 566
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I am looking for a new approach to trade stocks for a 3-5 day time frame. Do not have ability to monitor trades during the day so intra-day trading is not of interest. Anyone have suggestions for methods or trading approaches that are effective?
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Registered User
Joined: 10/7/2004
Posts: 2,181
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You might try studying the reactions of stocks that have moved up inside a 20-day bollinger band then come back down to the lower band with ascending TSV, OBV, etc.
Also, trendlines very useful.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Typically short-term price weakness can lead to trading opportunities.
(from the long-side)
There are various attempts to measure this. Some ideas to look at:
1) %K line of stochastic <5. (for multiple lengths)
When 10,15, 20 ,25, 30 lengths are all below 5 it is considered a buy signal
2) Bollinger bands.
A close below the lower band would be considered a buy.
(you would have to experiment with the settings).
3) Inverse dual-moving average cross.
When the short-term mav goes below the long term it is a buy.
I've seen lengths from (2 to 5) to ( 7 to 9 ) used.
4) Bar strength (if the close half way between the high and low is 50%)
You would look for 5 days that averaged <40% for a buy.
5) Percent change.
If the stock falls 3% in 1 day it is considered a buy.
(typically done with a buy order so you enter during the
day on a 3% drop from previous close)
6) Short-term MACD histogram
Experiment with lengths of:
4,8,4 and up.(in this version to keep things simple I make the first and last the same)
an upturn from low levels would be considered a buy.
7) Short-term momentum or RSI hitting oversold levels.
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Because these are counter-trend trades risk is a factor. (weakness may continue)
so consider your stop loss level.
Instead of a fixed sell time ( 3 days ) I typically use an inverse indicator to exit
the trade. (if you bought when oversold then sell when overbought)
Thanks
diceman
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Registered User
Joined: 8/12/2006
Posts: 83
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diceman, you said...
"Experiment with lengths of: 4,8,4 and up"
Do you imply backtesting?
What is a good way to go about doing this ?
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Registered User
Joined: 1/28/2005
Posts: 6,049
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zaq999ca
All the methods described above are different ways the measure price
weakness. A choice has to be made depending on your trading style.
If we accept more weakness you may have a bounce quicker. If we
accept less weakness the stock may fall more. Also the more your
requirement for weakness the less candidates you will find.
Typically to find short-term weakness indicators need to be adjusted to
short-term lengths. A 4,8,4 MACD histogram will give faster signals of
weakness than a 12,26,9 histogram.
Remember your goal in this method is to find stocks short-term undervalued.
Purchase them with the idea it will return to fair value.
Put up a chart of HD (home depot) with a 4,8,4 MACD histogram. You will see
short-term weakness at: 10/18/06, 9/21/06, and 8/24/06. This the type of trade
you are trying to find.
When I stated look at different lengths I was talking about the pointer tool and
the indicator with a price chart. Maybe 5,10,5 or 6,12,6 suits your needs better.
This is what the trader must decide.
Realize that I believe a trader should diversify what they do. I consider this
buying weakness. I also trade with buying strength. (new highs, break-outs)
If anything I've said sounds confusing or does not make sense. You should stay away
from this type of trading.
Thanks
diceman
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Registered User
Joined: 9/21/2005
Posts: 566
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Hey Diceman, good tips and suggestions. I think the bollinger band approach and maybe linear regression may be something that suits my trade style. Do you have a preference between these two types of indicators? I have never used MACD so dont know much about it.
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Registered User
Joined: 9/21/2005
Posts: 566
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tobydad, when you say trendlines are useful do you mean in conjunction with bollinger bands or just on their own? Also, useful in what sense? As trade confirmation?
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Registered User
Joined: 10/7/2004
Posts: 2,181
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jcfla7; re: trendlines, yes to both. 20-day bollinger bands, TSV and a 30-day linear regression are my favorite indicators. I use them in a particular fashion to which I've grown accustomed.
The trendline supporting the price movement confirms and fine tunes entries and exits. I draw trendlines of various lengths and over various time frames. I will use one drawn under 1 or more years for an overall view of the price movement. Then another over the highs during a pullback or retracement; this helps me decide when to get back into a stock that has climbed, is retracing and, hopefully, will climb again. I set buy stops to enter the order when the price goes over that trendline; assuming other indicators have not turned sour on me.
For me, if a stock is riding the support of a trendline, getting upward pressure from the 20-day lower bollinger band, getting support from the 30-day linear regression, the 26-day TSV has gone over the 0 line and the stock has shown any recent strength; that's a buy signal.
I'm an end-of-the-day trader like you and this has worked well for me. Found EGHT at 0.78 this way and numerous others.
I've learned alot from reading these boards and listening to real pros.
But remember Diceman's words (he's been around here a while and knows what he's talking about):
"If anything I've said sounds confusing or does not make sense. You should stay away from this type of trading."
I pray this is of some help.
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Registered User
Joined: 10/26/2005
Posts: 238
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I am new to trading (2 years) so for what it is worth I have tried about every indicator there is (looking for the holy grail)I have found most do ME no good. For me I look for price support and resistance on uptrending stocks and or cup and handle pattern. I usually do not short. Any indicator that help you to get a better idea of price or volume action I think helps. I like to see increasing volume so I use a 20 day ema on volume this helps me to see if volume is going up or down. I do like to see TSV above 0. I like to see MS trending up. On the price chart I only use 4 moving avg's and lines I draw. I have tried BB, MA envelopes,regression lines to name a few, but for me they cloud the price chart. Every one seems to have there own setup that works for them. Allways paper trade your system first to find what works for you. good luck AB
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Quote:"I think the bollinger band approach and maybe linear regression may be something that suits my trade style. Do you have a preference between these two types of indicators?"
I tend to use linear regression more than MACD. One of the reasons that I listed
a few ways is to show newer traders that it is the concept. (finding short-term weakness)
Not necessarily how you choose to execute it.
I think allenbary makes an excellent point. If its not working for you than feel free to
change.(Wordens: think for yourself)
I personally trade a lot of different styles and timeframes. I must use indicators to put
my eyes on stocks. I consider indicators as saying : hey look over here.
One thing I would add. To my view I see to many focused on what I would consider "weak"
stocks and cheap stocks.
I think sector analysis and relative strength are very important.
Take a look at the symbol TIE from 2003 to May2006. I don't think it matters what indicator
you use or what length. My guess is you would have made money on that stock.
You should always diversify. Trade some strong stocks long and trade some
counter-trend.
I have some friends that use 30 to 40 indicators on their chart. They tell me this is
lined up and that is lined up. All indicators are in agreement for a buy.
They fall to notice the stock they are looking at is a dog. Poor fundamentals, no
earnings. Gone nowhere for years.
Remember if you trade a MACD 12,26,9 histogram going positive. one stock moves up
2 percent and a second stock moves up 10%. Its the stock not the indicator.
Thanks
diceman
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Registered User
Joined: 9/21/2005
Posts: 566
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Thanks diceman and Tobydad. Tobydad, follow up question - for those indicators that you use - do you do an initial screen first with TC2000 to narrow down the list? If so, which do you screen for?
Thanks.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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jc; yes, TC is, for the most part, my only tool. I scan with several PCF's that show rapid drops and turnarounds, TSV of various time frames running low and then popping up, and prices running below their 20- and 13-day moving averages. Then sort by the 30-day linear regression and see which ones are down near the 20-day lower bollinger band.
You know how these things are, alot of personal style and comfort with what we're each used to seeing.
Thousands and thousands of hours looking at charts. Tracking, journaling, recording, studying....some crying, yelling and praying too. 
Glad to converse more but don't want to ramble. Glad to help if I can; so many have helped me.
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Registered User
Joined: 10/26/2006
Posts: 56
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Look from a broader perspective, how about: find the best performing sectors/ industries or sub-industry for the past 5 days, then find the best performing stocks or ETFs? if market is healthy. We do need lots of praying especially when the market is up, up, up...? Don't know when the big boys will pull the plugs or rugs under us?
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Registered User
Joined: 12/25/2004
Posts: 51
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A men! Best sector; best sub-sector; strongest member; and buy it on technical failure of a correction.
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Registered User
Joined: 12/5/2004
Posts: 49
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I like to become familiar with my stocks. If I did not have access to my account during the day then I would make sure I was very familiar with my stocks.
I like to be confident in my trades so I do not worry day and night.
I would start out with the DOW 30 and then go to the NASDAQ 100 and pick my 20 favorite stocks out of that group. That would give me 50 stocks to follow, and believe me you can out perform the world with 50 stocks if you do your home work and watch for the opportunities that the market gives you.
You can even use Small cap or Mid cap stocks to make up your list, but make sure you become familiar with them.
Once you come up with your list study their trading histories and you will see most if not all tell you when to buy and sell. Get a feel for what set up patterns you like and watch for those set ups. They will come if you are patient.
Use stops to protect yourself from falling in love with a mistake. Stops can even mean time limits.
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Registered User
Joined: 9/21/2005
Posts: 566
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The best sector, best subsector and best stock approach on prior 5 day trading is interesting. If you were to look for such a stock what would be a good trigger method to enter trade? I am assuming just jumping on board and hoping for continuation of recent strength is not likely to be the best approach.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Quote:"The best sector, best subsector and best stock approach on prior 5 day trading is interesting."
jcfla7
This can be tested. Lets say you wanted to look at the strongest
stocks over 5 days. then you wanted to see how they performed
5 days later.
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PCF1:
(C/C5*100)-100
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PCF2:
(C5/C10*100)-100
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PCF1 is the last 5 days percent change.
PCF2 is the percent change 5 days before PCF1
Put the 2 PCF's in a watchlist tabs. (PCF2 then PCF1) Sort
for best values in PCF2. Then check the change by looking
at PCF1 value
Thanks
diceman
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Worden Trainer
Joined: 10/1/2004
Posts: 18,819
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Note that PCF1 is already in your system as Price Percent Change 5-day.
- Craig
Here to Help!
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