April 22, 2017: New comments S&P500
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A great majority of private investors are trading based on fundamental analysis. They are long term investors buying stocks that are kept in portfolio for the long term. The idea behind is that in the long run the stock market is basically rising.
With this kind of investing the money must be spread among a bigger number of different stocks and sectors. This means that there must be sufficient starting capital and that it must be reserved for long term investing only.
A big disadvantage is the difficulty to define rules when to open and close a trade, because fundamental data is generally lagging considerably.
Looking for an alternative based on technical analysis techniques you can use the BBS or the "Band Break System" presented here.
Please note the formulas for BBS and indicators are proprietary but are licensed for private use with the purchase of the DVD. The "BAND INDICATORS" DVD includes the video presentation with the user manual and the source of the licensed formulas available for MetaStock®, MetaTrader4® and NinjaTrader® but can be programmed in any other platform with the available source code.
If you purchased the DVD and you want to auto-trade based on the BBS expert system to be used with NinjaTrader®, please let me know. It is ready and you can have it for free. A selection of 20 volatile stocks trading 100 pieces per trade, over a period of the last 5 years, gives a cumulative profit of 350% using a backtest simulation account.
Using technical analysis I believe there are two different approaches to look for buy and sell signals.
The first method is the method I use and explained in my book “Capturing Profit with Technical Analysis”. The method explained in the book, called “LOCKIT” uses all possible technical analysis techniques to come up with reliable buy and sell signals.
This is not the easiest method, because you need a very broad knowledge of all the basic techniques and the know how to apply them successfully.
A second method is to trail the price movement of a stock, buying and selling based on the fact that a short or medium term up or downtrend is broken, signaling a trend reversal. Here you have to find the most profitable balance between fast entering a trade avoiding as much as possible false entries and staying in as long as possible to let profits run. BBS uses this kind of method.
It should be clear that this kind of trading can only be profitable if the stock makes big enough price moves. A stock making only small moves over longer periods of time will not make you money. Therefore it is very important to make a selection of stocks that make regular larger moves over longer time periods. Later on I will give you some simple method to look for the right kind of stocks to be used with BBS.
For a successful application of BBS it must be applied as outlined here concerning:
With the help of some special indicators, I will show you simple technical rules that will help you making this decision. That way you can make even more profit compared to the full automatic trading based on BBS that proves to be successful.
Please note I will not include a description of standard techniques used. For all the basic techniques, please consult my book “Capturing Profit with Technical Analysis”.
BBS is available for MetaStock® and NinjaTrader mainly tested with the default values for trading stocks on a daily chart. It is also available for MetaTrader4 and tested on the forex EUR.USD pair.
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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