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I have a question on element 1. I have generally been buying CANSLIM
breakouts, but ranked the stocks by mainly RS and up/down volume. I've
written a simple system tester in quotes plus and was thinking of using it
to simulate trading the stock for the last two years and rank the stocks by
those results. Is that kind of how you do it? Does it work?
Thanks,
Mike
-----Original Message-----
From: Jim Greening [SMTP:JimGinVA@xxxxxxxxxxxxx]
Sent: Saturday, November 14, 1998 4:26 PM
To: Metastock
Subject: Stock Trading Building Blocks
All,
This may be slightly out of scope in that it is a larger topic
than just MetaStock charting and testing, although that's definitely a
good part of it. I thought it would be interesting to share our ideas
on the building blocks or elements of a complete stock trading
methodology.
I have tried to build my own trading system on what I think is a
logical set of building blocks. The elements of my trading system
follow:
1. A systematic method of narrowing the universe of stocks to a few
potential trading candidates that have certain characteristics that
have resulted in successful trades in the past. My searches or
filters use a combination of fundamental and technical criteria.
2. A market tracking mechanism that indicates when it is OK to enter
a position and whether that position should be long or short. I use
trend channels for this.
3. Tests and a methodology for making the final stock selection for
new positions.
4. A money management system that limits overall portfolio risk on
each new position and tells how large each position should be. I
won't risk more than 5% (usually 2 to 3%) of my portfolio on any one
position.
5. A method for setting stops and targets although targets are not
always required. Stops should be based on Technical Analysis rather
than an arbitrary percentage or point move. Stop placement tied back
to money management can affect position size. Again, I use trend
channels for this.
6. An exit strategy. Mine is simple, exit when a target or stop is
hit.
Does anyone have any comments on the above building blocks? Any
to add? Do you disagree with any? Is anyone interested into going
into details on each of the building blocks?
JimG
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