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Registered User
Joined: 12/3/2004
Posts: 8
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Hi, I am new to tc7000 and was wondering about 2 things. One is does anyone or do you recommend buying an at the money put instead of using a stop loss? The other is, it seems to me that there should be a set of rules you can refer to depending on the type of trader you are, daytrading, swing, hold. I guess I am looking for some specific advise on building a system which has a track record for swing trading. With all the tools and indicators it could take me another forever to try to develop something that works. Any words of advise would be helpfull.
Thanks...
elfman45 
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Worden Trainer
Joined: 10/1/2004
Posts: 18,819
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We trainers cannot offer this type of advice. I will move this to the Market Talk forum so others in the community can share their thoughts.
- Craig
Here to Help!
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Registered User
Joined: 1/28/2005
Posts: 6,049
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elfmasn45
I would not recommend using puts. Should the stock rally you will lose money on the put side of the equation. You have to get into a mindset that when you are
stopped out. You are not wrong. Instead your money management has worked.
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As a start I would recommend looking into moving average cross systems.
When a short period moving average crosses a long period moving average.
(for a buy signal)
When a short period moving average crosses below a long period moving average.
(for a sell signal)
Look for values from:
STMAV=3
LTMAV=11 (for short-term trading)
STMAV=5
LTMAV=20 (for short-term trading)
STMAV=10
LTMAV=40 (for intermediate-term trading)
You can consider adding a long-term trend filter. Such as you will only
take long signals from the dual cross when the stock is above its 80 day
moving average.You will only
take short signals from the dual cross when the stock is below its 80 day
moving average.
I think MAV systems are a good place to start with because they are not open to a lot of
interpretation.
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Your stop levels should be proportional to your profits. A day trader may only be
looking for a 25 cent profit. (larger amounts of shares will be purchased to make it worthwhile)
It would be silly for someone looking for 25 cent profit to have a 4$ stop.
Someone who trades when a 10 period moving average crosses a 40 day moving
average. May see profits of 10,20,30,40 dollars. A 4$ stop would not be unreasonable.
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If you would like to "see" what you are getting into. you can create
percent true indicators to highlight the chart on you "buy/sell/" signals:
AVGC5>AVGC20
or:
AVGC5>AVGC20ANDC>AVGC80
(these would be for buy signals simple mav)
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XAVGC5>XAVGC20
or:
XAVGC5>XAVGC20ANDC>XAVGC80
(these would be for buy signals exponential mav)
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For sell signals change the ">" to "<".
Feel free to experiment with the 5,20 and 80 values.
You may find these videos interesting:
Understanding Moving Averages - Part I, The Basics
Understanding Moving Averages - Part II, Using Multiple Averages
Create PCFs and EasyScans to find moving average crossovers
Hope that helps
Good Luck
diceman
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Registered User
Joined: 12/3/2004
Posts: 8
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Thanks diceman, this does help.
elfman45
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Registered User
Joined: 12/3/2004
Posts: 8
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Hi, sorry I did not ask this before but I find there are many definitions, what is your definition of short term vs. intermediate term trading.I set up the 5 vs. 20 crossover and will also set up the 10 vs. 40. also do we want to see the price over the 80MA or the 10MA over the 80MA.
Thanks..
elfman45
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Registered User
Joined: 1/28/2005
Posts: 6,049
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The general rule of thumb would be the smaller the MA length the shorter your trade
length will be. I've seen as low as 3 and 6 mavs.
5/20 would probably trade days to weeks.
10/40 weeks to months.
You probably want the close to be over the 80 but it is a matter of taste.
remember some will use 100 or 125 or 200 instead of 80. you must look at what fits your personality.
Take a look at symbol JNJ. In the AUG05 to DEC06 period the 5/20 gave buy signals.
They were dangerous signals because of the down trend.
Now look at the OCT04 to MAY05 period. Buy signals there were in a much stronger trend.
This is the type of good/bad periods you are trying to define with the third moving
average.
Notice that 1/04 to about 6/05 was a good period.
6/05 to about 5/06 was bad.
It has just started looking good again.
Notice how clear the trends on that stock are. That is the type of stock
you are looking for.
Now look at C. Its been about 47$ a share since 5/04. Not a good trend
stock.
Thanks
diceman
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Registered User
Joined: 12/3/2004
Posts: 8
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Thanks diceman....Very clear and helpful.....
elfman45
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