Friday, February 26, 2010

Trade System Tutorial

Last weekend I started a new feature in the subscription email service, "Trade of the Week."  This is where I find a highly probable trade for the coming week, either from the trend model list or more likely, from the entire universe of stocks, etf's and indexes.  Below is a copy & paste of what I sent out last Saturday.

II. Trade of the Week

On Friday morning I posted the Daily chart of DELL, pointing out how effective the Trend Model was catching tradable moves up and down with this stock. []  On Thursday night Dell announced earnings, which means nothing to our algorithm.  The mindless volatility surrounding this fundamental news caused Dell to drop far enough on Friday to trigger a fresh SELL SIGNAL on its Daily Model (chart attached). The Weekly Model has been SHORT since January 25th, so now with the Dell Daily in sync with the Dell Weekly, this represents a high probability SHORT for the week ahead. (The new Daily Reversal-Long for Dell is at 14.22.)
On Monday morning, DELL opened at 13.48.  Assuming that was the entry price on the trade, with Dell currently (Friday morning) at 13.16, the trade is +2.37%Sounds meager at first blush, but that equates to 10.1% per month and 0ver 120% annually.  

Dell Daily Trend Model - Feb 26th mid-morning

You can see from the above chart, DELL has drifted lower all week, but no great price collapse or crash.  Exactly!  These Trend Models are designed to be on the right side of the price trend and on whatever path and velocity that takes.  Do enough of these and you will get your share of those wonderful price collapses, as well as price explosions (see BIDU below).

BIDU +18% since February 3rd Buy Signal

So what's Allan's point?

I am getting a lot of questions from subscribers about providing a tutorial for how to trade these trend models.  My best answer is also crassly self-serving, so I have tried to dance around it with some simple basic rules, hoping that would be sufficient to get everyone on board with what we are doing here. 

All you need to be successful with this system are the Weekend Updates.  It also helps to glance at the Evening Updates, after the market closes.  The intra-day stuff is for glued to the screen traders like myself, but do not let these short-term plays intimidate, nor confuse, nor dissuade you from using this service to completely turn your trading and results around in a very positive way.  

Here are some guidelines, done in true minimalist mode:

  I.   Read and study these Weekend Updates each weekend, 20 minutes should do it, no less then 10 minutes, no more then about an hour, its not that complicated!

 II.  Take each Trade of the Week.

III.  Read the Evening Updates, pay attention to any Pending or Reversals noted, we're talking five minutes here, if that.

IV.  Pick three to five stocks or etf's using Weekly, Daily (or soon to come, 240 minute time frames) and enter on their very next Trend Reversals.

 V.  Monitor and manage your picks in accordance with their respective Trends.
That's it and it will work, although don't expect perfection.  And yes, I know Dell has recovered about 10c since I first wrote its results above, but I am not about to re-write and re-compute everything now, which would change again by the time I get the new numbers posted.  

Anyway, I have some hourly models to monitor.



t said...


Anonymous said...

right on! Keep it simple stupid, esp if you want that hot chick.

et dixit amen dico vobis nisi conversi fueritis et efficiamini sicut parvuli non intrabitis in regnum caelorum

Anonymous said...

Short Selling Restrictions
"All these short sale restrictions are going to do is create a vacuum. Once the shorts are driven out these shares will plunge."

TZA, EDZ, . . .

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