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Strategies & Market Trends : Stochastics

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To: Speed Racer who wrote (39)	2/4/1998 2:39:00 PM
From: Wayners	Read Replies (2) of 927

This is solid momentum investing. Today's market is absolutely dominated by the momentum investor. One of the mistakes I made early on was thinking that it would be better to try to pick bottoms and tops and try to ride an entire move thinking that it would be difficult to find other comparable plays and to keep the number of flips down. I personally found it stressful every time I entered a new position--so basically I was trying to avoid the number of entries I was doing. After a lot of experience with this I've learned that that was all wrong. There IS ALWAYS AN EXCELLENT PLAY IN PROGRESS. My previous approach wasted a lot of time as I invariably got in too early. Don't make my same mistakes. Try testing "the methodology" with different entry points. Try entering when the 5 day stochastic crosses the 50 line or when it crosses its own 12 day moving average. That will give you more of the total move, but I maintain that its the last part of the move that has the greatest price movement. I think this is a good way to go because it gets us out of the business of finding weekly, monthly, or longer tops and bottoms--a very difficult task. Always go with the trend. With this methodology you're then left only trying to pick as close as you can to the high or low for a single day for entry. That may still be hard, but the consequences of getting it wrong are not that great. Again, avoid major news events at all costs. Also, DO NOT GET GREEDY!!!! Always get out with a profit, even if its a SMALL profit or not as much as you would have liked or expected. You can try WoW Pro 5.0 out if you like. Send me your address on the private message thing and I'll send it to you (3 3-1/2 inch disks). Bill Junemann (also from S.I.) did it for me. It will crap out in 60 days without registration, but at least it will give you a chance to decide for yourself whether you need it. I'd like to get the WoW Daytrader or TradeStation sometime in the next year and half, but not that eager to part with the dollars yet. The great thing about WoW Pro is it lets you create your own indicators and experiment. You can get a lot of experience just by looking at hundreds even thousands of charts with the same indicators on them to get an intuitive feel as to how well they work or don't work.

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