Hi Eric,
The thing about Chaikin's interview that I liked the most was his desire for simplicity. His insistence on simplifying the set of indicators he uses rang a bell. His idea was that you need one indicator for trendless markets, another for a trending market. You also need a volume based indicator for money flow. I've used his interview to simplify my charts down to the basics. I now have:
1. An indicator to establish whether the stock price is trending or not. I use Wilder's ADX for this.
2. A trend following indicator. I use Wilder's Parabolic Sar. I do use P&F to see breakouts, I use Bollinger Bands also and moving averages. But I just happen to like them on my screen, it feels sort of bare without them. I actually just use P&F and Wilder's Parabolic Sar for following trends.
3. An oscillator. I use the Commodity Channel Index (CCI), same as Chaikin.
4. A volume based indicator where I use Chaikin's Money Flow.
It is a lot more fun looking at charts now.
How does this apply to P&F? Well, P&F breakouts hurt if the stock you're following is not in a trend -- you tend to get whipsawed. So I first try to figure out whether the stock price is in a trend or not. If it isn't, then I prefer to buy near support (which usually coincides with CCI being oversold). On the other hand, if the stock price is trending, then breakouts are easier to negotiate. All of this after I have decided that the market is going in the direction I want the stock to go -- or near abouts.
I don't really follow the Equity Put Call Ratio. I read the number religiously everyday, but it doesn't really play a part in my decisions. I find that I do pay attention to the VIX though. Maybe it is because I have the data I want to create P&F charts for the VIX while I don't for the put/call ratio.
As far as being just a programmer goes, it makes a good disclaimer -- don't follow me, I am just an egg. <g> That, and the fact that there are certain analysts/talking heads around who think "programmer" is a pejorative. Of course, the same analysts have also talked up LU just before it tanked. So I guess it isn't so bad being a networking software engineer -- no networking software/hardware engineer I know would have touched LU with a long pole, low or not <g>. And I know you understand my feelings about LU, I read about your new phone system on their thread!
-Atin |
