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Bhola,
I don't know of any one book that covers it. There are bits and pieces
in several books. I'll copy some previous posts below that might help.
Jim
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From: Jim Greening
Sent: Friday, May 09, 1997 4:48 PM
To: Guy Gordon; MetaStock-List@xxxxxxxxxxxxx
Subject: RE: Oakwood Homes
Guy,
I also prefer hand drawn channels using Trader Vic's trend line drawing
methodology. That's all I use for intermediate and long term trends.
However, if you use that methodology for short term trends that haven't had
time for a couple of highs and lows, you will almost always get stopped out
during normal movement as the first highs and lows are made. To get around
this problem I use Raff Regression Channels for short term channels only since
they tend to be more forgiving.
The problem is trying to tell where to set your channel start and end
point. For new Short Term Up Trend Channels (STUTCs), the start is easy. Set
the start at the low just proceeding the down trend channel breakout and don't
ever move it. After at least one new good low has been set and a following
high has been set that is higher than the high just before the new low, set
the right side of the channel at the new high and extend the channel to the
right. Anytime a new high is made, stretch the channel to the right to
include the new high. Do not stretch the channel anytime the close is not a
new closing high.
Once the trend channel is drawn, trend channel trading is simple. For up
trend channels, buy when the stock has just bounced off the bottom of the
channel. Set your target just below the top of the channel. Set your stop
just under the bottom of the channel. Vice versa for a down trend channel and
a short position.
One change I'm in the process of trying applies to new STUTCs. I draw
the new channel as described above. I may have bought when a short or
intermediate term down trend was broken. If that was the case, I'd set the
stop just under the old low and not change it until I had enough data for the
new STUTC. I will only have bought when there is an intermediate or long term
up trend channel already in existence. I'll set my target based on that
intermediate or long term trend. After the new STUTC is established, I'll
move my stop to just under that STUTC, but will keep my target based on the
longer term trend channel. Whenever, the stock hits the top of the STUTC, I
won't close the position, but will sell covered calls to protect it as I did
with IOM today. I'll buy the calls back when the stock reacts back to the
middle of the STUTC. If the stock continues to rise, I'll let the stock be
called.
My OH stop was somewhat questionable since the late April low that I used
to draw the channel wasn't much of a pullback from the high. However, I
rather make a mistake closing a position I shouldn't have, then holding a
position I should have closed <G>.
After 2 or 3 months, if I'm still in a stock and it has had some good
highs and lows that will confirm a Trader Vic type trend line, I'll switch to
a channel constructed that way. Some earlier posts on my strategy that you
might have missed follow:
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Chris,
I have a couple of Telescan prosearches I use to identify new stocks for
my database. I run those searches weekly and look at the Telescan charts. If
you have Telescan and would like to have my prosearches, just yell. If I like
the charts, I then download the historical data to my MetaStock database.
When I get the stock in my MetaStock database, I use a default template to set
up a CandleVolume chart of the stock with a small volume window under it and
three indicator windows over it. The indicators are RSquared, LinRegSlope,
and MFI. I then run the five MetaStock system tests in the compare mode, to
find which one works best with that stock. If the mfi test does best, I don't
change anything. If CMO, QStick or CCI does better, I change the MFI
indicator to the one that does best. If ROC does best, I change the RSquared
and MFI indicators to ADXR and ROC. That way I can tell which test does best
by just looking at the chart. About once a month I look at all the stocks in
my database and prune those that I'm no longer interested in.
I update the stocks in my database daily using the Downloader. The
stocks in my database are in different subdirectories for LEAP Stocks,
Stocks, LEAP Watch, Stock Watch, and portfolio lists. I run my MetaStock
Exploration which is a normalized version of the system tests weekly. For the
stocks identified by the Exploration, I look at the chart and run the
appropriate system test. If the stock looks like it may be a near term buy,
I'll move it to the appropriate watch list. I look at all the charts in my
watch list daily. Once they move out of a buying range, I move them back to
the appropriate stock or LEAP directory. Whenever, I have buying power in one
of my portfolios, I make my selection from one of the watch lists.
That's a short summary of my investment strategy. Yell if you have any
questions.
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Cliff,
It's explained in the book "Trader Vic - Methods of a Wall Street
Master", by Victor Sperandeo. His method of drawing trend lines is explained
on page 71. He defines short term trends as days to weeks, intermediate term
trends as weeks to months, and long term trends as months to years. To draw
an up trend first select the time period to be considered. Then draw a line
from the lowest low in that period up and to the highest minor low preceding
the highest his so that the line does not pass through prices in between the
two lows. (Not passing through any data and a low before the highest high are
both important points). Then extend the line to the right past the highest
high point. It is possible that the line will go through prices past the
highest high. In fact, that's one indication of a trend change.
For a down trend its similar, except the line is drawn form the highest
high in the period to a high before the lowest low.
I highly recommend Trader Vics book just to understand his trend line
strategy that he explains in chapter 7.
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Hope that helped. Sorry about the dissertation <G>.
Jim
-----Original Message-----
From: Guy Gordon
Sent: Friday, May 09, 1997 2:29 PM
To: MetaStock-List@xxxxxxxxxxxxx
Subject: Re: Oakwood Homes
On Fri, 9 May 97 13:23:09 UT, "Jim Greening" <JimGinVA@xxxxxxx> wrote:
Jim,
Without taking up too much of your time, could you post a short
summary of how you use Metastock and Raff regression channels to trade
stocks?=20
I draw my channels "by hand", and I'm always willing to learn better.
:-)
>All,
> OH fell rapidly through my 20 3/4 stop and I finally closed the =
position=20
>at 20 1/2 for about a 6% gain. I'll look for a replacement this week =
end.
>Jim
-----Original Message-----
From: BHOLA N ANEJA
Sent: Tuesday, May 20, 1997 10:33 PM
To: INTERNET:metastock-list@xxxxxxxxxxxxx
Subject: RE: PAIR near bottom of channel
You have a book recommendation on *Channel Trading*? Thanks.
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