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Strategies & Market Trends : Befriend the Trend Trading -- Ignore unavailable to you. Want to Upgrade?

To: Dale Wingo who wrote (413)	8/13/1998 10:40:00 AM
From: Dr. Stoxx	Respond to of 39683

Dale, Thanks for your post, and your interest in the thread. We are making some good money here, even though the market has been having a rough ride. Befriend the Trend Trading is a solid, conservative system. No speculative plays here. Only big, strong, upwardly moving stocks. To answer your questions: I abandoned the MACD, not because it is not a helpful indicator, but because I find it to be somewhat too slow reacting for this kind of trading. I hold positions for 1 to 4 weeks, and the MACD, it seems to me (using Clearstation's settings), reacts too slowly to make precise entries. To find upwardly trending stocks, you can do a couple of things. You can buy the Investor's Business Daily and circle the symbols that have a RS indicator of 95 or better. These stocks have been outperforming 95% of their peers over the last 12 months. Or you can do what I do: Select a group of stocks you are interested in following (I have a prime tier of about 50 issues, and occasionally check on about 20 or 30 others). Look at their charts and ask: Are prices higher now than 18 months ago? 6 months ago? 3 months ago? If you can answer yes to all three questions, then you have found a great bull market, and one worth following. More on next post...TC.

To: Dale Wingo who wrote (413)	8/13/1998 10:45:00 AM
From: Dr. Stoxx	Read Replies (1) \| Respond to of 39683

Response to Dale, part 2: Once you have whittled down your list to about a dozen stocks or so (I follow about 15), then print off their charts, using a Stochastics setting of 14 and a MA of 40 days (simple average). The next thing to do is get out a couple of colored pens and a ruler. Draw your channel lines (connect first the price lows over a 3 to 6 month period with a straight line, then draw a parallel line over the highs, trying to connect as closing prices as possible). This gives you a rough estimate as to where the stock is heading, and where are its support and resistance levels. Then draw another line under the Stochastic lows. Once you have done that, note: are the Stochastic lows either remaining at about the same level, or getting lower, while the corresponding prices are getting higher? If yes, this is a very bullish sign. Part three coming up...TC.

To: Dale Wingo who wrote (413)	8/13/1998 10:51:00 AM
From: Dr. Stoxx	Respond to of 39683

To Dale, part 3: OK, so once you have established your "Befriend the Trend" markets (see the list I posted this morning for mine), you next job is determine you entry point so you can execute a trade. 2 factors determine this: -the best "buy signal" indicator is the Stochastics, when the fast line (%K) crosses the slow line (%D) from somewhere near the 25 level. That is why it is so important to watch stocks as the Stochastics start to fall down to that level. That indicates a lull in the trend, and a cross from or near 25 indicates the trend's resumption. -confirming such a buy signal will be chart patterns. Basically I look for 3 types of patterns: triangles, flags and channels. You can go to this link for an explanation of these: equis.com Chart patterns are amazingly prophetic. They are like footprints from the future, telling you where the price is likely to go. More in the next post...TC.

To: Dale Wingo who wrote (413)	8/13/1998 10:59:00 AM
From: Dr. Stoxx	Read Replies (4) \| Respond to of 39683

The Dale correspondence, part 4: When to sell: objectively speaking, this is the easiest part of trading my system. Subjectively speaking, selling is the hardest part of trading any system. But here are my rules for selling: -sell when your stop loss is hit (always set a stop loss as soon as you purchase a new issue...never use "mental stops", always live ones). I usually set my stops at 8% when the market is hot. Right now I'm setting them between 4% and 5%. -sell when the price hits your price target. I usually set 2 price targets, and when the first one is hit, I re-evaluate and consider holding out for the 2nd target. Again, it depends too on the market. Right now, one target is enough for me to sell. Price targets are determined by chart patterns (top of price range, base of triangles, length of flag pole, etc.). -sell when Stochastics cross and dip below 75. This is important, for many times they will cross above 75, or kind of "mingle" with each other, but stay above 75, and the price continues to rise. Wait until they dip below, then sell. In short, the purpose of selling is to bank your gains. Befriend the Trend Trading will never boast of "3-baggers" or 50% gain in 12 months. We are looking for 5% to 10% per winning trade, 2 to 3% per week average, and winning at least 7 out of 10 trades. You can go a long way on that kind of return. Hope this helps (I was looking for a good opportunity to summarize my system, now that I am back in the game). Good luck, and keep posting with any questions, TC.