To John and others:
So many have asked via PM for a summary of the BTTT system (maybe I should be marketing this?? <ggg>) that instead of pointing out old posts, let me restate the system as I now trade it:
LONGS:
a) find stocks that are in both a long term (6-12 months) and medium term (3-6 months) uptrend that are also in a short term (1-3 week) downtrend. Usually, a stock above its 40MA can be considered in an uptrend, though some like to use MACD to confirm this (I have gotten away from using MACD)...and a correction down to or near the 40MA is ideal. A great resource for finding such stocks is hardrightedge.com (see the "dip trip" section).
b) I've also had success recently with "reversal trades" (the above are "continuation trades"): i.e. stocks that are just beginning to pull off their lows after a correction down to or near the 200MA...but only if they have established at least one higher low than the lowest low, and ROC analysis shows a divergence between price and momentum (i.e. recent lows show a weakening in momentum), which is absolutely crucial (this is the key, I believe, to successful reversal trading)...and while these are lower risk trades, they are often slower to develop.
c) After finding the stock that fits one of the above, then check stochastics set at 14 on timely.com. I have in the past used a "trader's 5" with Stochastics, which gets you in and out more quickly...but I think 14 is most consistent and gives fewer false signals. Ideally, %K should have dipped with price below 25, but I also consider dips down to 50 (called "mini-signals").
d) The trade is entered once %K crosses %D on its way above the 25 level (or 50 level). For a more precise entry, you can look at hourly charts and get in once %K is well above 25. An 8% to 15% stop loss is then set, depending on your risk tolerance and the volatility of the stock. This stop is moved up at the end of each up day, or left alone on down days.
e) The trade is closed once is either stopped out (hopefully with a profit), the price hits a predetermined price target (which requires chart analysis...see any TA manual for this), profit target (I usually look to exit at 20% if it gets that high), or if Stochastics, having risen to 75 level, drop below that.
More in the next post.
TC. |
