Thanks, guys. I've been investing for years, and have dabbled in swing trading for the last two or so--and in that time I've probably made most of the dumb mistakes the books tell you not to do. I've managed to ignore risk and money management rules, when I first started, being totally ignorant of what they were. I went the 'guru' route, and found that most of their picks were worthless. I went the 'scalp' route, and found it didn't suit my temperament, Ergo, I'd lose on those, too. I tried various combinations of indicators, but didn't backtest them. Only in the last year have I learned, by rueful experience, that a dispassionate system is the way to go. And decided to apply the same mindset I use in IT analysis to trading.
So, this is what I use:
I use daily charts for my entry/exits, and week/month to look for even longer term trends and support/resistance points. If I find a nicely trending stock (eg, KLAC these last few months) I'm very happy.
All MAs are 'simple'. I use a 50 and 200 daily MA. Both must be greater than or equal to their values of the day prior to the buy (ie, 'both are rising', in essence). I like to find stocks which have shown a positive 50/200 cross in the last week or two, and put them on my watchlist. I also look to see where nearby overhead resistance might be, and note that too.
I use a slow stochastic, %K length of 14, %D of 3 ('days' in both cases) smoothing value of 3. My oversold line is set at '20', and overbought at '80'--I believe this tends to catch ONLY the truly oversold/overbought moves, but that's just my personal 'comfort level'. One could get more frequent trades by adjusting this. I buy when the StocD crosses the 20 line downward (this may need refining, but on a smoothed stochastic it does tend to get me in right at the bottom).
I look for highly liquid stocks (> 1M/day) and stick to those trading above $10 share. My intent is to avoid super-volatile BBs or OTC stuff. I don't trade it if it has more than four letters in the symbol
My initial sell-stop is the value returned by a 14 day 2-standard deviation (below the close of the day I buy). This implies that I won't get stopped out by 95% of the daily ordinary movement of the stock, and that if I AM stopped out, it's because of a signifcant downside move. Once I know the actual dollar amount I'll lose if that stop is triggered, I can calculate number of shares to buy, based on the rule of no more than 2% of at risk-capital 'at risk' in any one position. EX: If my 2% is $1000.00, my buy price is $20/share, and my two-standard deviation initial stop is down at $18.00, my per share risk is $2.00. Divided into $1000.00 means I can buy up to 500 shares and sleep at night.
Once the stock moves up I use a trailing stop, and monitor it. If it reaches overbought territory I don't sell, but do begin to tighten my stop, especially if a range begins to form. If a range forms and is not broken within five days of its start, I sell, take my profit, and look for new opportunities.
Any one stock will give fairly FEW buys each year, so I monitor a large stable to get new buys every couple of days, and I stay diversified among 5-8 uncorrelated stocks.
For an example of recent repeated good 'buys', take a look at KLAC for the last few months. If you can backtest, you'll see that this system generates steady profit--you may not become a Bill Gates right away, but for me it does provide a steady, unexciting living (I don't like excitement in my trades--at a football game, yes, but not where my money is concerned).
Does all this make sense?
, it's like Henry Ford's most famous saying.. "anyone colour .. black".