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Jim:
Let me say that you are not at all out of scope. You are discussing
philosophy/theory. There are few things more practical than a good
philosophy/theory to guide your actions.
Item 5 on stops may need some clarification. For example, if you mean
crossing a moving average and using an oscillator like rsi or stoch or some
such, I agree with you. If you mean using a previous low, intermediate or
major, I'd say no, not by itself. This method can give you major losses.
Lionel
-----Original Message-----
From: Jim Greening <JimGinVA@xxxxxxxxxxxxx>
To: Metastock <metastock@xxxxxxxxxxxxx>
Date: Saturday, November 14, 1998 6:32 PM
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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