Monday, July 11, 2011

More than One Possible Setup

In the book One Good Trade by Mike Bellafiore there are several sections on expanding  your arsenal of trading setups. Read the book to find these extremely good examples.
up market[ support plays/pull backs ]
range market[ momentum ]
down market[ resistance, bounces ]
If you were to stay in a trade longer than a day would the setups change? It made me start thinking if there were not more plays for all the different trading styles. Each discipline seems to have several of its own unique time and setup plays....

Predefined Scans
The easiest examples are found in the charts, candlesticks, points & figures or technical analysis fields. has many of these captured with predefined scans. I use the search feature to find specific scans that other traders might be using on my stocks each day. For example, on Friday, Skechers (SKX)  search came up with
Results for SKX
Moved Above Upper Bollinger Band
New CCI Buy Signals
Elder Bar Turned Green
This Monday morning has been a volatile market start so the results came out a little different.
Results for SKX
Bearish Harami
Elder Bar Turned Blue

Caveats - Of Course this is not the exhaustive list of possible setups or investing styles
StockCharts continues:
Philosophic Accuracy:
Scans are designed with a particular investing philosophy in mind. Value investors use scans that try to find weak stocks that are showing signs of a turnaround. Growth investors use scans that try to find stocks that have recently moved higher on strong volume. Short-term traders use quick, volatile indicators in their scans technical formulas while longer-term investors may use slower, less jittery indicators. And so on.
I assume they are using the default values for the technical indicators to achieve these results. If traders are using their own unique settings the search results would change. But it gives you an idea of  which stocks are on someones watchlist. If you change the time period you are changing the bars. The sensitivity will vary with the addition or subtraction of bars. This will affect the consistency and accuracy of the indicator. As a general rule if you want more sensitivity then
 - add more bars
- shorten the time period
- use EMA over SMA

Conclusion on Investing Styles
A good long-term investor uses technical indicators to get a good entry point. A good short-term trader uses fundamentals to get a solid stock to trade with. No matter what style of investing, your mood can vary from day to day; Good traders use what fits their personality/mood and what fits the market at the time to make money.

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