I have used TC2000 off and on for the past 3 years, and like most users, have tinkered with various combinations of PCF's to attempt to acheive "the Holy Grail" (i.e., a perfect stock picking system). Unfortunately, this software is only good at presenting viable candidates on an intermittent basis. You, the trader, still have to pull the trigger on which stock to trade, and live (or die) with the results.
An interesting set of PCF's that I use to determine when to be in and get out of the market came out of my infatuation with moving averages and RSI (Relative Strength Index).
My first step on the last day of each month is to choose the 800-1000 stocks that I will use for the next trading month. I like solid stocks, so my three criteria to select these stocks are: (1) $15 or higher stock price, (2) trading 200,000 shares per day for the previous 60 days, and (3) stocks that are 5+ years old. The number of stocks vary from month to month, but are in the 800 to 1000 range.
The second step is to create watch lists for each of the 31 TC2000 sectors (Aerospace/Defense, Automotive, Banking, etc..) and add the selected stocks from the first step to each of the sector watch lists. This step takes about 10 minutes, using the mark and copy process.
The third step is to utilize the 7 PCF's that I have created. These PCF's are (1) Current Price above 5 Day MA, (2) Current Price above 10 Day MA, (3) Current Price above 20 Day MA, (4) Current Price above 50 Day MA, (5) New High Today, (6) Current Price above all of the above 4 MA's, and (7) RSI at 50 or above AND RSI higher that RSI 10 trading days ago. Plotting these PCF's on 7 columns (side-by-side) gives me an instantaneous look into all of the stocks within a particular sector. I also plot the previous 4 days PCF's on other tables, so I can flip from 1 day to the next, looking for trends in stocks, industries, and sectors.
The fourth step (utilizing Microsoft Excel spreadsheet) is to plot the total number for each sector's stocks, as well as the total number of "TRUE's" for each of the above 7 PCF's. I have a complicated weighted formula that I use to derive a TOTAL PCT score on a daily basis for each sector. I also tabulate all scores for all PCF's to come up with a daily TOTAL PCT for the overall MARKET.
Using another Excel spreadsheet to copy the TOTAL PCT's for each sector, I can see each sectors daily score side-by-side, as well as the overall market, too. I also color code the scores, ranging from RED (7.49% or under), MAROON (7.5% to 9.99%), PURPLE (10.0 to 12.49%), YELLOW (12.5 to 14.99%) and GREEN (15.0% and above).
I then take the above statistics and plot them on a daily basis using today's and the last two trading days stats to form an expotential pct for each sector each day. This helps to smooth out the day-to-day choppiness of the market.
Using the colors schematic, you can see the elephant-like steps of the market as each rally occurs, and where the momentum of the ball tossed in the air starts to slow down and eventually fall at the end of each rally. This system allows me to be in cash when the market falters (such as Jan 16, 2003 to current date), and to be ready with my stock choices from the sectors that always lead the next rally.
The cool thing about this system is that a lot of what William O'Neill says is true, in that the sectors and industries that lead a rally get there first and stay up longer through the end of the rally (i.e., they are the market leaders, or the first tier of any market rally).
The first tier stocks are always the ones that gain anywhere from 5-20% on a rally (sometimes more, if you catch the right stock in the right wind). The second tier stocks are usually 2-3 trading days behind the first tier, and they don't stay around as long as the first tier stocks. Their gains are more modest (around 3-10% tops).
The second tier stocks have their own steam under them, but also gain from the ground laid by the first tier stocks, and are pulled along for the ride.
The third tier stocks come in on the last days of the rally, and the results from those stocks are barely noticible. They are, to use an O'Neillism, the laggards of their industries, and should be sniffed at and disgarded as dogs beneath contemp.
My key is to wait until a sector reaches the MAROON stage to see which stocks are poised to breakout, utilizing the 4 MACD strategy esposed in the WORDEN Archives. When the sector reaches the PURPLE stage, I am ready to make a trade. As always, I seek confirmation through other technical indicators. I then trade the stock based on the S&P 500 Daytrade System, except I use a sliding stop loss which keeps me in the black on a longer basis (I try to get 5% out of each trade, but no worst that a 2-3% loss). I have been successful on 75% of my trades, which keeps my wife off my back.
As choppy as this market has been for these past few years, you need to know when to play and when to hold them. Since I am adverse to SHORTING stocks (something seems un-American about it), I utilize the above system to keep me honest.
Would like your input on the above system, as well as any system that you use in coordination with TC2000.
Thanks,
Bob
An interesting set of PCF's that I use to determine when to be in and get out of the market came out of my infatuation with moving averages and RSI (Relative Strength Index).
My first step on the last day of each month is to choose the 800-1000 stocks that I will use for the next trading month. I like solid stocks, so my three criteria to select these stocks are: (1) $15 or higher stock price, (2) trading 200,000 shares per day for the previous 60 days, and (3) stocks that are 5+ years old. The number of stocks vary from month to month, but are in the 800 to 1000 range.
The second step is to create watch lists for each of the 31 TC2000 sectors (Aerospace/Defense, Automotive, Banking, etc..) and add the selected stocks from the first step to each of the sector watch lists. This step takes about 10 minutes, using the mark and copy process.
The third step is to utilize the 7 PCF's that I have created. These PCF's are (1) Current Price above 5 Day MA, (2) Current Price above 10 Day MA, (3) Current Price above 20 Day MA, (4) Current Price above 50 Day MA, (5) New High Today, (6) Current Price above all of the above 4 MA's, and (7) RSI at 50 or above AND RSI higher that RSI 10 trading days ago. Plotting these PCF's on 7 columns (side-by-side) gives me an instantaneous look into all of the stocks within a particular sector. I also plot the previous 4 days PCF's on other tables, so I can flip from 1 day to the next, looking for trends in stocks, industries, and sectors.
The fourth step (utilizing Microsoft Excel spreadsheet) is to plot the total number for each sector's stocks, as well as the total number of "TRUE's" for each of the above 7 PCF's. I have a complicated weighted formula that I use to derive a TOTAL PCT score on a daily basis for each sector. I also tabulate all scores for all PCF's to come up with a daily TOTAL PCT for the overall MARKET.
Using another Excel spreadsheet to copy the TOTAL PCT's for each sector, I can see each sectors daily score side-by-side, as well as the overall market, too. I also color code the scores, ranging from RED (7.49% or under), MAROON (7.5% to 9.99%), PURPLE (10.0 to 12.49%), YELLOW (12.5 to 14.99%) and GREEN (15.0% and above).
I then take the above statistics and plot them on a daily basis using today's and the last two trading days stats to form an expotential pct for each sector each day. This helps to smooth out the day-to-day choppiness of the market.
Using the colors schematic, you can see the elephant-like steps of the market as each rally occurs, and where the momentum of the ball tossed in the air starts to slow down and eventually fall at the end of each rally. This system allows me to be in cash when the market falters (such as Jan 16, 2003 to current date), and to be ready with my stock choices from the sectors that always lead the next rally.
The cool thing about this system is that a lot of what William O'Neill says is true, in that the sectors and industries that lead a rally get there first and stay up longer through the end of the rally (i.e., they are the market leaders, or the first tier of any market rally).
The first tier stocks are always the ones that gain anywhere from 5-20% on a rally (sometimes more, if you catch the right stock in the right wind). The second tier stocks are usually 2-3 trading days behind the first tier, and they don't stay around as long as the first tier stocks. Their gains are more modest (around 3-10% tops).
The second tier stocks have their own steam under them, but also gain from the ground laid by the first tier stocks, and are pulled along for the ride.
The third tier stocks come in on the last days of the rally, and the results from those stocks are barely noticible. They are, to use an O'Neillism, the laggards of their industries, and should be sniffed at and disgarded as dogs beneath contemp.
My key is to wait until a sector reaches the MAROON stage to see which stocks are poised to breakout, utilizing the 4 MACD strategy esposed in the WORDEN Archives. When the sector reaches the PURPLE stage, I am ready to make a trade. As always, I seek confirmation through other technical indicators. I then trade the stock based on the S&P 500 Daytrade System, except I use a sliding stop loss which keeps me in the black on a longer basis (I try to get 5% out of each trade, but no worst that a 2-3% loss). I have been successful on 75% of my trades, which keeps my wife off my back.
As choppy as this market has been for these past few years, you need to know when to play and when to hold them. Since I am adverse to SHORTING stocks (something seems un-American about it), I utilize the above system to keep me honest.
Would like your input on the above system, as well as any system that you use in coordination with TC2000.
Thanks,
Bob
