That's not saying very much positive about your model.
At least the idiot who wrote the original momentum formula got the name right even tho it doesn't measure momentum. I truly appreciate what you've shared about the need to understand momentum.
Intermediate-term trading
- Thread starter Steve Ladd
- Start date
At least the idiot who wrote the original momentum formula got the name right even tho it doesn't measure momentum. I truly appreciate what you've shared about the need to understand momentum.
The culture on EliteTrader is rough and tumble. How best to participate? Stream of consciousness maybe. In that vein, I haven't explained the low-PE aspect of my method. I have been heavily influenced by Meb Faber's Global CAPE writings. Search it if you want to follow where I'm going with this. I like global CAPE because it is well-researched and long-term but not quite buy-and-hold. He established an ETF called GVAL that follows the strategy. It buys stocks from those countries whose exchange indexes have the lowest CAPE in the world. The worse countries now are places like Greece, Russia, and Brazil. Blood in the streets. The problem is, things can get still worse. For that reason, GVAL gave losses for its first couple years. It's now going up nicely because EMs are generally, but I asked myself, why not wait until a country starts to recover before you buy its index, or individual stocks there? And if that makes sense, why not also get out whenever that country goes south again, even if their CAPE is still low? After all, reversion to mean isn't necessarily linear. And once a country's CAPE goes above its average, why sell if the trend is still good? Follow it up. So now I'm tacking onto Global CAPE a complete set of trend following rules, though the variables can be set to exit relatively infrequently. I'm not sure how to back-test this hybrid method. I see precious metals and other commodities as similar to a country with low CAPE. When they are below their inflation-adjusted average they have a better chance of good returns. So they go onto the watchlist too. My method is doing great but it's still a newborn baby. Does anyone care to work on this with me? We could start a new thread.
Actually they're very good at detecting momentum, but during the wrong phase. Price is at or near exhaustion by that point, and broken any obvious resistance/support levels that any dummy can see on a 5 minute chart.
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oh yeahhhh, negative correlation!
only I wouldn't trust it like I some other negatively correlated signals.
I was journaling early this morning when I realized I discovered another insightful clue to what I imagine your models must look like. It was immensely valuable at that moment to have a name for what I was looking at. Thanks again.
No insults intended, but have you not realized by now that you're talking to a group of professional and degenerate gamblers? I buy and hold tangible assets. I come here to discuss and sharpen my gambling skills
What you are trying to do is called position trading. If you talk more about positions instead of intermediate term trading you will find replies. However most people want a fast buck and ignore position trading. It is often very hard to buy a stock and hold it for the duration of the trend, typically several months
I have been doing position trading for about 15 years (right after Y2K). Prior position trading I swing traded and day traded starting in the late 1980s. Many of the lessons I learned from burning up a few accounts in day trading and swing trading served me well in position trading.
There were probably ten or twenty questions I initially tried to answer in position trading but what I found is that it made my trading plan a monster and not workable. I had tried to use day trading and swing trading sets in position and that did not work.
So what are some of the steps that may work for you (I am sorry I am not going to publish my whole trading plan):
1. Get charting software (not even going to suggest one).
2. Pick a chart time frame - I ended up with weekly charts to trade my positions on. Stick with the chart time frame and do not let price movement on a lower time frame define exits or entries
3. Pick an index (and maybe sector) that tracks your assets (harder to track than you might believe). Chart the relationship between the index (sector) and the asset (This step is optional but I like tracking. Do your own thing in your plan).
4. Buy and Sell (nope not giving my exits or entry - just hints) - Price is king and no indictors (like Stochastics). Understand trend. It is amazing how well the old concept of buy at support and sell at resistance can be made to work. Positions can be long or short. Positions can trade price breakouts if the index (sector) has a strong breakout as well. Tougher buy and sell methods for position are momentum and volatility.
5. Stops or hedges - Using stops can be tough on a position trader and cause too many losses. What I learned to do is hedge when it is too over bough or too oversold.
In positions I was never a big fan of using Channel EMA trading systems using things like 13 week MA and a 26 week MA since the whip saws can stop you out too much. And the MA I use as a reference is something like a VIDYA(14,5) or VIDYA(21,5) (not the numbers I really use).
The toughest part of position trading is not the entry and exit. The toughest part is defining when you have a strong trend to jump on to because you are going to trade for months. Mentally you have keep repeating to yourself “…position trading follows intermediate trends…don’t exit early…”. Position traders also can use fundamental analysis to select buy candidates and then technical analysis to pinpoint the correct buy points.
The second big problem in position trading is defining how you ignore short-term fluctuations and hold a position through nasty whip saws. During those nasty position whip saws many traders choke, sell the position (as a big part of the gains crumble) and give up on position trading. Position trading may suit you better if you enjoy the analytical approach, like to uncover hidden gems, can sit tight through daily and weekly price swings, and do not want to be glued to the computer all day
Many position traders like me use options or Ultra (Long or Short) ETFs (we tend toward a different approach known as hedging instead of stops), which aims to protect the long-term profits. The Ultra ETF or an option acts as a short-term insurance policy against unwanted price movement.
I have been doing position trading for about 15 years (right after Y2K). Prior position trading I swing traded and day traded starting in the late 1980s. Many of the lessons I learned from burning up a few accounts in day trading and swing trading served me well in position trading.
There were probably ten or twenty questions I initially tried to answer in position trading but what I found is that it made my trading plan a monster and not workable. I had tried to use day trading and swing trading sets in position and that did not work.
So what are some of the steps that may work for you (I am sorry I am not going to publish my whole trading plan):
1. Get charting software (not even going to suggest one).
2. Pick a chart time frame - I ended up with weekly charts to trade my positions on. Stick with the chart time frame and do not let price movement on a lower time frame define exits or entries
3. Pick an index (and maybe sector) that tracks your assets (harder to track than you might believe). Chart the relationship between the index (sector) and the asset (This step is optional but I like tracking. Do your own thing in your plan).
4. Buy and Sell (nope not giving my exits or entry - just hints) - Price is king and no indictors (like Stochastics). Understand trend. It is amazing how well the old concept of buy at support and sell at resistance can be made to work. Positions can be long or short. Positions can trade price breakouts if the index (sector) has a strong breakout as well. Tougher buy and sell methods for position are momentum and volatility.
5. Stops or hedges - Using stops can be tough on a position trader and cause too many losses. What I learned to do is hedge when it is too over bough or too oversold.
In positions I was never a big fan of using Channel EMA trading systems using things like 13 week MA and a 26 week MA since the whip saws can stop you out too much. And the MA I use as a reference is something like a VIDYA(14,5) or VIDYA(21,5) (not the numbers I really use).
The toughest part of position trading is not the entry and exit. The toughest part is defining when you have a strong trend to jump on to because you are going to trade for months. Mentally you have keep repeating to yourself “…position trading follows intermediate trends…don’t exit early…”. Position traders also can use fundamental analysis to select buy candidates and then technical analysis to pinpoint the correct buy points.
The second big problem in position trading is defining how you ignore short-term fluctuations and hold a position through nasty whip saws. During those nasty position whip saws many traders choke, sell the position (as a big part of the gains crumble) and give up on position trading. Position trading may suit you better if you enjoy the analytical approach, like to uncover hidden gems, can sit tight through daily and weekly price swings, and do not want to be glued to the computer all day
Many position traders like me use options or Ultra (Long or Short) ETFs (we tend toward a different approach known as hedging instead of stops), which aims to protect the long-term profits. The Ultra ETF or an option acts as a short-term insurance policy against unwanted price movement.
Day trading = Major league
Swing trading = Minor league
Position trading = Little league
1) Find a stock screener and search for stocks that have low PE’s. I’d look at other fundamentals as PE doesn’t really reflect a stocks value.
2) Your signal should be when the price stops falling and begins to go up. How you do that is up to you. Nothing works all the time.
3) Use whatever exit you feel comfortable with.
Intermediate term trading is no different than day trading except the time frame is longer. You won’t be right all the time and you have to take your losses quickly.
The nice thing about intermediate trading is that you don’t have to spend all your time watching the market. I switched from day trading to swing trading and now spend 10 minutes every evening managing my portfolio. I still make the same percentage return on my capital and get to spend more time pursuing other activities.
Thank you Rabbitone for giving me a name. I am a position trader. Is that synonymous with trend follower? You came into it from day trading to spend less time trading. You watch the weekly chart and fight the urge to open the daily. I come into it from buy-and-hold, willing to spend more time at it than I was used to, which was nothing. The monthly chart is my default. Intra-day doesn’t tempt me. I already use a charting software, track both individual things and their sector indexes, ignore indicators, and watch for support and resistance, not that I am any good yet. I will look into the VIDYA. In my short career I have successfully boarded several breakout trends but haven’t suffered the dreaded whipsaws yet. I’m afraid I won’t be ready for that. I am analytical, not emotional. Some of my instruments are Vanguard MFs (that will get me laughed off this site!) so I can’t use stop orders. I will look into that hedging but it sounds like insurance and I don’t like insurance. It looks like you have to figure exit details out for yourself because everybody is different. I am looking at multiples of ATR. Maybe 5 ATR? But breaking down through support could trigger a sale before the ATR does. Thank you also Deaddog.
You might have that backwards.