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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Dick Brown who wrote (9273)	2/13/1999 11:57:00 AM
From: Richard Estes	Read Replies (2) \| Respond to of 12039

Your example of exits could be put into a system format. With QP2, your scans could spell out "sell at 23.25" as an example. Why do you sell early? Do you follow your plan? If you do, you might change plan. If you don't, you might look at the plan's results. In building a plan or system, we simply say if this or this happens, I buy. When this or this happens I sell. Then you test to see how using the plan in the past pays off. If you find that it does well on many stocks and does not hurt you BAD on any of them. You might should trust it and use it. Without a plan, you have 100s of indicators/chart patterns bombarding you with sometimes conflicting information. Your emotions determine actions, not you previously logical structure to the plan. This allows your emotions to pick and choose actions to take. A good system followed, rarely hurts you. Very complex systems can be built in MSWIN 6.52 feed by QP2 scans, much better than the near past ones. When you turn to the short term trades, RT data is needed to develop trusted systems. The RT can be fed from the EOD results.

To: Dick Brown who wrote (9273)	2/13/1999 4:11:00 PM
From: Michael Watkins	Read Replies (3) \| Respond to of 12039

Dick, Here's one part of my experience in using a system to help 'let profits run'. I used to have a very difficult time letting things run. I am not able to spend all day following the market, but just the same found myself preoccupied with what my positions were doing because I didn't have an exit plan. Hindsight being what it is, it is clear to me now that I spent too much time deciding when to get in and too little time deciding when to get out. At least I have not generally suffered from the tendency to let losses run! But I used to over-react from almost any negative move and consequently miss out on upside. Much of my portfolio is shorter term now, largely because of market volatility. 2-4 days to 2 weeks on average. My favorite stocks I go back to time and time again. I stay away from illiquid stocks. Initially I wrestled with using indicators and interpretation to decide when to exit, but found that left too much to my imagination. Not good - still second guessing and that depends on where my head is at at the moment of analysis. Don't want that! I tried plotting a fixed percentage trailing stop and that worked better, although I still found myself second guessing it sometimes when other indicators appeared to confirm the overall move was still in my favour. Lately I have been experimenting with setting stops based on the volatility of the price action. With many of the stocks I follow, and I suspect this is a general truism, increased volatility to the downside is generally indicative of future downside price movement. Would certainly appreciation thoughts from others on this observation. Volatility seemed to be a good concept to base exits on, and based on some reading I did I decided to see how volatility based stops might help. Here's what I am plotting as an alternative to a fixed percentage trailing stop now. I'm reasonably happy with it, and find that I trust it enough to accept its signals. I'm sure it can be improved too. Stop based on Standard Deviation of Average True Range (SSDATR) (ref(Close,-1) - (( atr(PATR) + std(atr(PATR),PDEV,1)) * (1+K))) Is a WOW formula using variables: PATR - Periods Average True Range (30) PDEV - Periods standard DEViation (9) K - Correction Factor (.10) The default values I provided are only a starting point. My rules for interpreting: - close below previous days' SSDATR - GET OUT. - close below today's SSDATR - WARNING. I plot WOW Alertmarkers in different colours (yellow warning, red - get out!) directly on the chart. This leaves nothing to the imagination at all. It isn't perfect, but its not bad. The exits satisfy my need to based trading decisions at end of day (I travel a lot. Very hard to trade actively from a plane). I think it could be improved by factoring in volume as well. Something to think about. Suggestions welcome. Although I think over optimizing this stuff is probably a fools game too. *Bottom line, I think it is critical to develop a Plan* that you feel comfortable with and you MUST trust it.** Until you do, you will always second guess what your charts tell you. In my case that has led to more and larger losses. Michael