Case study - SGMT trading with rails
I model my indicators in order of priority:
1. Price
2. Trend (the black line is the main trend, I use another one to help me, say the orange line). Ideally, what I want to see is the stock being above the trend line and both trends pointing up. But that doesn't always happen, so I need to take other indicators into account.
3. The rail system: green, blue, red rails. These are your support/resistance levels. You want to buy on strength near them and sell on weakness near them. But it's important to not go against the rail that is nearest to you. In other words, never short a stock that goes below the red rail if the rail is rising, nor buy a stock that goes above the green rail if the rail is falling. At the very least you need to wait until the rail is flattish before you make those decisions.
4. My context sensitive intelligent stochastic (the first lower indicator). This is tuned to the main timeframe. It works like the regular stochastic, but it's more intelligent and know when to move faster/slower than pure stock price suggests. These non-linearities are not so drastically different to make it undistinguishable from the regular stochastic. You use it the same as you would with the regular stochastic. But it is better.
5. My intraday RSI (2nd lower indicator). This is tuned to very short term timeframe.
6. My RRG graph (the 3rd indicator). This is tuned to a longer timeframe than the trades.
The combination of the above gives a good picture of what the stock is doing and also helps me stay aware of the traders with higher/lower timeframe than mine.
I make my decision to buy or sell based on the first 4 items. But if I am on the borderline, then I seek confirmation from the lower two indicators.
With all of this in mind, you can see the trading decisions were made for SGMT: Buy, then buy more, then sell all, and finally get back in.
Walk through the chart with the above understanding of the indicators and see if you see the logic.
PS The fundamentals and diversification still matter. That is how you choose your stock in the first place.
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