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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: quote 007 who wrote (41071)	6/1/2003 7:02:11 PM
From: PuddleGlum	Read Replies (2) \| Respond to of 57110

i have just learned--and it's not the first time--that i would have been much better off waiting for a reversal in my bp So, you've had your head handed to you a few times? Like everybody else who's traded a few times, to be sure. The idea of waiting for a reversal in indicators is almost fundamental. But the normal BP is more useful than mine in that regard. Most BP's are calculated DWA-style, where the bearish percent is just 100 - bullish percent. I use a more volatile method in which the bullish percent is the percentage of stocks that are "interestingly strong" and the bearish percent is those that are "interestingly weak" and the neutral percent represent those that are uninteresting. So, if you took the % of stocks that are 5% or more above their 50 day MA you might come up with something like my bullish percent, while those that ar 5% or more below the 50 day MA are something like my bearish percent. The rest I just ignore. With a DWA BP the bulls and bears always always move inversely, but not so with mine. Sometimes the absence of inverse movement can be useful, though I can't point to a case where it has provided the decisive information regarding market direction. The reason that we frequently have to wait for a reversal in an indicator is often, I believe, because the dominant trend is part of an oscillator that is larger than the one(s) that we see as oversold or overbought. If you have a 3-oscillator system and you buy when the long oscillator is rising and the medium and short indicators reach oversold, and you sell when the long oscillator is down and the medium and short are overbought you will generally have one losing trade per trend. That losing trade is when the medium and short term turn against the long oscillator and the long one is about to change direction. That's simplified, to be sure, but I don't intend to write a book here.... yet. The idea of whipsaw comes to mind here, in which the effective trend is larger than the medium oscillator but smaller than our long oscillator. I'm still looking for a mechanism that will tell me how strongly as oscillator is pegged. That is, how can I distinguish between market strength and euphoria? How can I distinguish between market weakness and fear? Divergences are often useful in this regard, but they have a lot of false negative signals. I, too, look for 15-20% moves in stocks, and I like to hold stocks for more than a few days. Weeks or months is a desirable holding period, and years are not out of the question. An occasional day trade is fine, too. The trend is now up, on that we agree (only because I'm a de-clawed bear :) ). But at what point did that become apparent to you? How much of the move up did you catch? Of that tremendous amount of coinage that you (we) left on the table by anticipating the top, how much will you recover if Friday marked the top? How much more will you (we) lose if the market remains irrational for longer than we can remain solvent? Now what will it take for you to determine that the trend is down? Bring on the Tylenol. My head's starting to swim.