Investor's Toolbox (www.investools.com)

[Grob109]

Quote from FuriousInvestor:

^^

I agree. I was gullible, and ignorant. A big newbie. I had no idea how stocks worked. NONE. Not even a clue. The best thing that Investools did for me was spark my interest in stocks. It's not good for intermediate or expert traders, this is correct. I quickly realized that as I started reading books, forums like ET, and my own experimentation and analyzing of stocks in real time, and historical. This is why I regret buying it, but its too late now.

I'm not a "Pro" by any means, but I know A LOT (It's not even funny how much more I know than I did just three months ago) more than I did then, and I know enough to realize that Investools is bad. The whole system they teach is just bad. The site is good though, just their method of trading is a disaster waiting to happen. That's what hooks you, their method of trading seems so easy, especially to people like me who don't know a thing.

This is not a critcism of you. I am just making an observation about the subject of the thread and how a person (using you as an example) may not understand the context and connection of "trading" and Investools.

The audience was taken through a "paper" trade using quasi audience participation. That is, the audience at some point was getting the same answers as the presenter.

I am taking the reader through this for the express purpose of differentiating among various things that were on the table.

A EOD chart of MSFT appeared whose width covered about a year.

Then it dissappeared all but the right edge of the chart. The display had price (bars) and an MA interwoven. Volume bars appeared below price. Below this appeared a MACD histogram (this is an steppy chart that has color either above or below a central horizontal line. A "stochastic" line appeared on a graph where the 75 and 25 lines were also depicted.

To inform you right off about the "paper trading", we all were to be making money by using "signals" properly. The graph began to appear across the screen.

Lets observe for a moment what was going on and see why it was happening.

Is their any trader who would be picking MSFT to make money trading? Is there anyone in the audience (think right after lunch in a retirement community at a resort hotel) who would be "holding" or investing in MSFT for the last 25 years.

There is no way a three step selection process would ever pick MSFT as a "watchlist" stock for investing or trading.

We all are sitting in the dark and being told to use the TA signals to buy and sell MSFT to "paper trade" for practise to SEE that we all can do a good job investing in MSFT. That is, do better than we are presently doing.

Back to business. We are told to look for when three green arrows, one each on MA, MACD, and Stcohastics, show up cioncidentally which indicates a BUY. No body says buy. But we learn to say buy. Some people say BUY when they feel like it based on their investment preferences. They are told to cease.

Personally, I am doing as told silently and taking price notes and net values of my profits.

We discover that SELL means three red signals in cioncidence.

We trade for a year. B 77, S 90; B 78, S 95; B 80, S 90; and B 90, S 115. these are four trades over the year and this is a result of 8 more or less coincident triples of check marks.

There were many many failures from the audience but the presenter herded and corraled us to the finish line and the four trades did show up as zooming bold red arrows to summarize our success "paper trading".

Lets observe for a moment. I am letting my eyes rove about in the dimly lit atmosphere. I have just learned that the "TA system" is a gimmick for swing trading any stock that anyone could happen to pick regardless of the picking procedure to get any stock on a watchlist.

Three trades were swings on the same horizontal range where a system of filtering ws to take a person through three successive filters to get to a short watch list of about 25 stocks.

There is no, and I mean no, triple filter that would produce a stock that traded for 9 months in the same price range, period.

Not one person in the audience ever for a moment caught on to the idea that Investools could ever produce a chart that could be used for 12 months for investing. It cannot be done by Investools.

A person would never be in a situation where he had the "comfort" of looking at a series of signals on a specific singular stock. There is nada, zero, chance of using Investools to do more than 1 trade on a stock during any lengthy period of time, ever.

The first three steps of Investools makes it impossible to have any continuity on watch lists whatsoever. The only possibility of this happening is because of how stale the actual data for analysis really is. It is changed weekly and is not actually the most recent available data. Think Zacks type stuff that is not very swift in its basis nor collection. And you have to read it right to left as boxes of three colors with a percentile inserted inside (all independant of any other sector or stock corrolation)

So some people are glowing in the dark because they were "champs" and the presenter "coach" made them winners. All in a situation that will never occur using Investcharts. The presenter notes that this is just an example and not what is going on in the market now.

Now lets observe the "TA" part of this paper trading. In ET there is a thing mentioned vis a vis back testing. It is called curve fitting for some reasons. I am not a back tester nor do I do curve fitting. But I am capable of deeply analyzing "back testing" procedures and I can recognize how curve fitting has been done.

Lets say a group of salesmen get together to coerce some software producers to come up with a bunch os stuff that can be used to make sales. the salesmen want three indicators because two is not enough and more than three makes it "too complicated". Oh , and what signals will we use? Just make it work so it can be described and so it works during the time the user would be operating it. Make it work in the evening after market hours. Or any time since there is no data going into it until after the market closes.
thus it is possible to see that there is no connection between Investools and "trading". The best that could be hoped for is to deal with slower periods of the market........maybe cycling in a sense of a carrier of a carrier of the actual "trader's" trading cycle.

more.....

 

[Grob109]

Which of the three indicators gives the least frequent signals? Which of the three indicators gives the most frequent signals? What is the name of the other indicator? These questions can only occur if there is no synchronicity of the three indicators. There is also a corrolary requirement that there is a compatibility of the source of each signal regarding the whole set of signals.

MSFT was pumping out MA signals a dime a dozen and occasionally the offset was sufficient to cause a set of three signals to not be related to the then contemporary price move. The MA signal is generated by the direction of price crossing the MA. Thus, it is a reference to an average price that accumulated long ago.

The MACD (8, 17, 9) was shortened from the inventor's sort of. It was running slower than the MA signal generator but still much fastr than the "stochastic" which, in effect, called ALL of the trades that were possibilities for Investools. The histogram tool signal is generated at the neutral by the direction of crossing the neutral. It is when convergence ends and divergence begins.

The approach is actually a single indicator TA approach that is achieved by over driving the stochastic. What I mean it that the stochastic line shown has zero capability to differentiate within the range of 25 to 75. This is unfortunate since stochastics is an oscillator and all signal utility signal comes "after" the 50. Investools uses a "before" 50 signal which, as a risk adverse person , I feel is premature even if it is so overdriven.

I concluded that using a premature stochastic coincident with the end of convergence and the beginning of divergence on MACD where the price move is finally crossing a lagging MA is not an entry point for doing an investment. Exits occur, correspondingly, when divergence ends and convergence begins all other iindications bing the same. During periods of hold, the divergence/convergence condition continually changes it turns out. I could not discern, from other than a sales design viewpoint, why sometimes it matters and some times it doesn't. the answer is that the investor is not intersted in the short trem swings compared to the intermediate term swings.

So why is the intermediate term the focus? For swing trading the short term is the focus for the prescribed reason that more money is made. (do the compounding to see this).

Investools is designed as an answer to the unintiated persons going from the financial advisor's theme of portfolio balancing to the inception of market timing considerations as a way of dealing with the loss structure (rebalance when pain tolerance is reached) of their investing in a new way. By Investools suggesting that people can leave investments when they have run their course (the insiders are leaving test (Enron chart was the example)) and, by the way, you can also learn when getting into a stock or sector is appropriate while we are at the timing. It would not have been good to use the Enron chart for the paper trading exercise.

So the investools example is a good one for anyone going about the process of coming up with a trading or investment scenario.

You see the 43 sorts of step one do not work for any purpose regarding making money. The money making approach calls for sorting to get a watch list that serves one purpose: making money with a high money velocity. The Investools near miss can be seen easily when the IT activity of IBD is perused. stepping up from there to "trading" to make money simply moves you to short term trading and making use of the EPS and RS of IBD to do a short term sort instad of an IT sort that IBD provides to all .

Stocktables.com affords you this option for 100 bucks a year. sorting everythree of four days is purfect.

To have a watchlist that revolves is the goal as well. You need tenured stocks whose characterisitcs your MIND is familiar with as the basis of nailing down a high money velocity.

Having 5 good charaterictics of 13 and not having 3 good characterisitcs not missing is not the name of the game. Making money is the name of the game.

Traders make money in the short term by raking in the dough repeatedly and reliably. I rank stocks money velocity (daily value) based upon the last five cycles and the better stocks run about 5% a day in their rank. An investools cycle happens four times a year (if a person is capable of getting it to work at all) to make what a trader's cycle makes in 4 to 6 days. This is a free excel sheet exercise which uses data easily obtained free from clearstation.com portfolio set ups.

On clearstation you can have the MACD, and Stochastic. The default settings for each are not on clearstation as set up but you can change them to the apporpriate ones.

The EPS and RS of IBD is found on Dailygraphs as well. You pay for this. I feel CANSLIM is a good replacement for any fundamental analysis program offered by anyone. It is pragmatically determined on the basis of QUALITY. somehow Quality can overcome every gimmick in the book.

It was mentioned that reading ski books do not work for learning to ski. That may be true. My first skiis (white ash) were steamed on our basement steps. Snow was not an essential for me to ski; wet grass worked just fine. I am just suggesting that every person has great potential to make a great deal of money. with the advent of modern times, I am smiling here, everyone can get down and dirty and dig into things. I know i had a serious advantage over you guys because i had to make my own sheets of paper with graphing lines on them to do graphs by pencil.

You CAN get to the poiint of seeing the market and how it operates. There is about 5% a day available to everyone.

The issue is to get to cross over trading where you are leaving a stock that is not making the 5% anymore and, then, to move, smartly into another stock that is picking up money velocity and take that ride.

I found that when racing slaloms that I had better times the more time I spent in the air. I look at moguls as launching pads. I did have to come up with a cool solution for ski longevity. I managed to get into the testing racket with Head (once they came into being) and Dynaglass. The wooden skiis just seemed to break up a lot. LOL... When they invented safety bindings, I missed the long thongs but I never tore a boot apart after that.