Saturday, May 19, 2007

To Each His Own

TradingMarkets is a source of a lot of trading ideas. Here's one that was published this morning in Yahoo Finance. The premise of the article is that you should wait at least 15 minutes after the opening before day trading and that is always a good idea. Now I don't think I would just willy-nilly throw money at a stock as is suggested but if after the first 15 minutes it was bouncing off the S1 or S2 I might take a shot at it - as readers of this log well know and I would probably make some good coin - which you also know.

The one thing however that these guys insist on is that you always trade stocks above the 200 MA. I say that is an interesting idea but not necessarily appropriate to the current market - in other words - bullsnot.

In a recent article (not the one cited above) they describe a 5 day down system where you bought the sixth day after 5 lower lows in a row. We looked at similar methods many years ago and in fact wrote about a couple here in this BLog last year - they don't test very high so I've sort of rejected the whole idea. But TradingMarkets goes on to say (as they always do) to only use this method when the close is above the 200 MA. I say only use it when the close is below the 200 MA. Who's right - who's wrong - two men enter Thunderdome and only one leaves ....

Unlike TradingMarkets who uses a hundred years of data to prove their contention I use only 80 days. The fact that my 80 days just happened and their hundred years happened - oh a hundred years ago must have some bearing on the results of my tests because -

Greater Than MA 200 = 53% win rating, .89 reward/risk, -9.73% ROI
Less than MA 200 = 56% win rating, 1.96 reward/risk, 85.92% ROI

I win. That's significant and case closed. The reason why stocks below the MA 200 do so well is because all stocks that are trading above their MA 200 now once traded below their MA 200. This absolutely incontrovertible fact leads me to think that somebody, somebody really, really, really smart, must have bought them below their MA 200 or they wouldn't be trading above the MA 200 today.

So it's up to you - the TradingMarkets way (above MA 200) or the really, really, really smart way (below MA 200) - your choice.


Anonymous said...

Bongiorno. I hope your weekend is progressing nicely.

Oh, Master Filter Writer, I am fumbling my words in Stockfetcher---can you please help? I want the filter to show me stocks between 15 and 100 with an average volume(90) > 500000 where the weekly close is > the weekly open and the rsi(2) > 80 and the weekly close one week ago < the weekly open and the rsi(2) < 10. I'm trying to find that RSI(2) crossover from an extreme oversold condition to an extreme overbought condition on the weekly timeframe. Just my observation, but it sure seems like stocks tend to go higher after the rsi(2) makes a straight bee-line from O/S to O/B with no stops in between. I've seen a lot of BOBS and Crossovers involved with that bee-line. Does Stockfetcher not like my using "rsi(2) > 80" and "rsi(2) < 10" in the same sentence?

When and if you have time, I'd appreciate the filter-writing lesson.



Anonymous said...

Just a quick side note to show you what I'm talking about. Please look at your "Easy Swing Trading" example of GIFI and plot the rsi(2) on the chart. That July '06 Crossover is what I'm referring to where the rsi(2) goes from O/S to O/B in one straight line.

Thanks again.


Marlyn Trades said...

Try this - it doesn't test well in the current period but I agree that it could produce some winners.

show stocks where close is between 15 and 100
and average volume(90) > 500000
and chart-display is weekly
and rsi(2) 1 week ago < 10
and rsi(2) > 80
and weekly close > weekly open
and weekly close 1 week ago < weekly open 1 week ago


To own his each.