Daily trading plan - Part 1 | stockbee

3/16/2008

Daily trading plan - Part 1

This is a summery post for those who are new to Members only site.

Market Monitor: Bearish

The starting point for everyday trading decision is Market Monitor (MM). When MM is green it is bull market, when it is red it is bear market. MM is basically a Market Timing system for all the method traded here. So it acts as a overall filter and when it indicates safer period , your results with EP, IBD 200, DT, Virgins will be good, when it is in red, you have to be either short or in cash.



The Market Monitor is a market breadth indicator that tells you about the buying or selling pressure in the market. It uses different time-frames ranging from daily to annually to calculate market breadth. It can anticipate likely turning points and tells you when the market is in a confirmed rally stage.
This information is useful in managing risk and avoiding bearish phases for long side trades.

  • Number of stocks up and down 4% or more on high volume today.
  • Number of stocks up and down 25% or more in a quarter.
  • Number of stocks up and down 50% or more in a month.
  • Number of stocks up and down 25% or more in a month.
  • Number of stocks up more than 100% or more in a year.
.
Detail guidelines for interpreting Market Monitor are in the Trading Guide

If you see the MM signals in 2007 and 2008, it has signaled both bearish and bullish periods clearly and much ahead of time. It can give false signal as it did recently on bullish side, but the signal reversed in just 24 hours. MM gives you consistent and reliable signals as opposed to many other methods which rely on questionable assumptions. More than that as you can calculate MM values daily, you know what exactly it measures.

So the first starting point for trading decision on day to day basis is MM signal.

Currently MM is in confirmed red territory and hence cash or shorts are the favored options.



Methods

The predominant theme behind the methods traded and detailed here are :


1 Price Momentum


2 Earnings momentum

3 Neglect

4 Timing entry post a catalyst.

5 Breakout as primary signal

6 Conservative risk management

The basic principle is based on proven anomalies which show stocks with price momentum, earnings momentum and neglect tend to outperform the market in next 6 month to 1 year time frame. Most important thing in trading these things successfully is to have a well defined step by step approach where every element of the trade like equity selection, entry, exit, risk, stop, and profit targets are well defined and are structured in such a way as to enhance overall performance of the system. So for each method you would find detailed sub rules and guidelines to aid decision making. Each of those rules and sub rule has a well defined logic behind them.

Note: While the public site gives broad guidelines behind the various methods, it does not have the actual rules, scans, sub rules and guidelines used in day to day trading. So don't go by those scans.

On a day to day basis I trade a combination of methods:

  • Episodic Pivots Bullish
  • IBD 100/ IBD 200
  • Double Trouble
  • Virgins
  • Earnings Breakout
  • Episodic Pivots Bearish

Out of these methods the most are

Out of these methods the most are more



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