Chris, I am by no means an expert on TA. I've become convinced over the last year through experiencing losses using Fundamental Analysis that TA is the way to go. Using AIQ software, I have over the months been slowly refining a system that seems to work for me.
With the exception of RACE, which is a holdover from my Fundamental Analysis days, all the rest of my portfolio is 100% TA driven. I prefer to not know what the company does. My timeframe is short-term, meaning 2-20 days. I am currently bottom fishing, because of the opportunities present due to the beating that many stocks took in recent months. I look for positive divergences with respect to MACD histogram and RSI on the daily charts. I look for low priced stocks which seem to have bottomed out and are forming a base (eg. $4-15/share). I wait until my software's volatility indicator has dropped sharply and is poised to start increasing. I make sure that CCI (5 day) at the time of buying is low or negative.
If the stocks jump up, I look at CCI (5 day) to judge when it becomes overbought (above, say, 150-200) and I look to see where the price ends the day (eg, if at the high, there's more demand that will probably carry over to the following day). I have very small positions such that I have at any one time 10 - 15 stocks in my portfolio. I have a profit target which I try to lock in once I have earned it and it appears that the stock isn't going to climb any more in the near term. If a stock isn't going anywhere after 1-2 weeks, I dump it, trying to sell at breakeven or at a small loss or profit. If a stock surprises me and drops such that I have a good sized loss which doesn't look like will turn around soon, I dump it, lick my wounds and move on.
My software each night has various lists of stocks which I sift through: a list of stocks with new lows, a list with weak relative strength, and two lists of stocks which the AIQ software "thinks" will go up in the near term. I save promising candidates to a "potential buy list" each night, and moniter them until the above technicals look good. I also look at MACD, Stochastics, Directional Movement Index, OBV, and other indicators. Unfortunately, AIQ doesn't have DAHL or StochRSI, and I am thinking of buying Metastock 6 to supplement AIQ. I put in buy limit orders by computer before I go to sleep. During the day I do not trade.
I buy before breakouts, not after. I sell after breakouts-- its a short term approach in which I try to have a lot of winning trades, each earning a small-medium profit.
I use a discount broker that charges for computer trades a total of $800/year flat for up to 20 trades per month, with each additional trade only $8, thus minimizing my leakage.
Hope the above helps. As you know, you need to develop a system that feels good for your personality and objectives, eg., short-term vs longer-term trading, etc.
Regards, Jan |
