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  • Backtest for various long only strategies...
  • steiny,

    well yes, in essence its about not fighting the trend.

    the way i would choose to word it is to say general conditions. if the general conditions are bullish, then moves against that direction are -- more often than not -- wrong. by general conditions ill talk just about price action because economics is, for lack of a better word to describe my thoughts -- subjective.

    we can talk about price being above the 200 day MA, or the 20 above the 200, along with several other things (weekly MACD MA's above 0). i wont claim any one of them is the golden goose, just so long as we define bull vs bearish environments. IMO this should be done on weekly/monthly charts. once that is distinguished, we can say daily chart movements against that trend, will more often than not snap back in favor of the general conditions.

    as it was so eloquently written in reminiscences of a stock opperator; "that is why i say that the (wo)man who is right always has two forces working in his favor -- basic conditions and the men who are wrong. in a bull market bear factors are ignored. that is human nature, and yet human beings profess astonishment at it."

    taking that premise, if we define the "basic conditions" with a few longer term indicators, then backtest bullish signals in bull markets, accuracy jumps 15-50% in most things that i follow. its so far beyond any measure of standard deviation that we have to say something is right about it, that we have advanced our understanding of the markets and our inidicators. as long as the definition of bull/bear markets are objective, repeatable, and you trust it; then i find this to be the creme De La creme of trading. in my view nothing other than money management can help a trader be profitable as much as this.
  • Does anyone have a stock/few stocks that they continuously scan in order to have a good sense of the stock's behaviour. I was watching DE for about 6 months and got very familiar with price movement.
    • Admin
      Everyone tends to acquire [over time] a group of their favorite tickers. A good place to start I believe is with common names like APPL, POT, GS, RIMM, GOOG, BIDU, X, etc. [even your DE or CAT are good ones] which are in constant demand and do not remain "oversold" for long periods of time.

      Many investors decide they're more comfortable confining themselves to specific sectors; getting a *feel* for what drives and affects each one like retail, tech or oil & gas.

      I myself tend to prefer stocks with a good deal of "momo" [momentum], beta or volatility [which keeps me out of utility, healthcare and many consumer staple names] but I scan everything; keeping my scans limited to tickers over $5.00 and with volumes greater than 1 million shares traded per day. The reason behind this is simply because I've had a few bad experiences with thinly traded stocks where, like fly paper, its easy getting in but getting out [with the price I wanted] proved to be much more difficult.

      You will find your own preference but I definitely do not recommend thinly traded or speculative [get rich quick] penny stocks for beginners. No way. I would start with names on the S&P 500 or concentrate on a few specific sectors while you're papertrading and eventually you'll weed out the "unwanteds", define your style and expand from there.
  • i wont give scans right now, but i will say a few things about some of the dangers, how to "fix" these things.

    often, people will tweak indicators till it works perfectly in the past, known as optimization. so what happens is they find that the 12/23 MA cross is the best (fake numbers, dont try it) for S&P500. then they go forward, apply it to forex or something else that moves at a different speed. their optimization fails them because they fit it for select data and a select market.

    a way to solve this is instead of backtesting, forward testing. what i mean by this is optimize your parameters from, say, 1995-2003. THEN, once youve done that, then run the backtest on 2003-2010 and see if the results differ. in weak performing systems the results will not match. this will show when youre optimizing too much for specific data, vs actually finding something inherent about the market.

    The next thing i dont know why it took me so long to figure out, but, in bull markets look for buy signals, bear markets look for sell signals. makes me sound clueless when i say this, but watch how few really do it. find a way to define the two markets, then look for the appropriate signals that get you in tune with the primary trend. i consider this the holy grail of system writing. few have even thought of it, even fewer use it..
    • Thank you Ryan. I like your suggestion of backtesting different time periods to verify accuracy. So, "in bull markets look for buy signals, bear markets look for sell signals", is this based on the idea of not fighting the trend, in other words you're looking for shorts in a bear market and buys in a bull market. Just want to be clear.
  • Found this site on scanning and chart analysis accompanying the scan. Interesting info. under the "power spike" link on the front page of the site.
    http://www.hardrightedge.com
  • This is taken from stockchartist.blogspot.com on scanning for momentum stocks during a market that is trending up.

    Those were much simpler days for stock picking. As the market matures and moves into the Mark-up phase, since there's more and more optimism and excitement I look for greatest opportunity with the least amount of downside risk. Rather than trying to be the first to find a hidden gem, I look for stocks with proven momentum and join the herd stampeding towards them.

    After each trading day, I run several scans of about 5000 stocks. The two I like the best are: 1) stocks making all-time new highs (more correctly 5-year new highs) and 2) “Stocks on the Move” which looks at such parameters as: greatest % price change during the day, good earnings growth, volume surge during the day, and strong RSI (relative strength indicator). Another source is a weekly review of IBD’s Industry Group rankings looking for Groups that have moved up the most in ranking over the previous 4 months.

    Interestingly, while many names on these lists return day after day, new ones are continually added and some drop off. Finally, I scroll through the charts of stocks comprising these lists and, based on a subjective assessment, pick those that appear to have the best set-ups or are on the verge breaking out.
    • Admin
      You read Joe too! *lol* Timeframes are important when scanning and must be considered dependent on your personal investing style. One could scan on a weekly setting, finding stocks in an uptrend then drill down to daily to determine when the time is right and then finally shorter timeframes to zero in on entry points. But I'd recommend starting with the basics. Oversold [using Slow Stoch, RSI or CCI] then observe past movements. Has it consistently been bought back up when oversold and is the stock in an uptrend or downtrend? Become accustomed to observing the past behavior of the stock then consider current market conditions. Are we in a strong bull move or are we near a top and beginning to pullback. You don't want to fight against the wind [so to speak]. Add other indicators as you become more accustomed. MACD in my mind is a must.

      An alternative to scanning 5000 tickers is to scan the ETFs themselves or indexes for "sectors" that are preparing to move. Once defined, a trader can drill into the individual components or names within the sector. Much faster.

      Some members scan using their brokers scan engine but a few alternate sites that members like to use for scanning are http://finviz.com and http://freestockcharts.com [may require a subscription]. Other options may be available on our Links page. Just a few more ideas for you.
      • Thanks Kos, I like the idea of scanning etfs as a start. I remember over on nosepickr, i mean stockpickr, asking Ryan about utilities, I think Bill Gross was touting them as a buy. Anyways, I remember Ryan looking at the upward price movement of a utility etf, then found the stocks in the utility etf that had started to move, and then singled out stocks that had yet to move and were perhaps going to follow suit. Thanks for jogging my memory about that tactic.
        Steiny
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