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Here's a really simple way to make some money while you're learning
more complex methods of trading.
I like to use it to make a quick trade or two when my regular trading
isn't producing enough to use my capital account effectively. I trade
it on 30 min and 10 min screens. I don't know if it works well EOD,
especially in a choppy market. I don't trade it that way so I don't
know.
Set up a new indicator and put in the following
Moving Average Ribbon
Periods := Input("Time Periods", 1, 1000, 20);
Spacing := Input("Spacing", 1, 100, 5);
Ribbons := Input("Ribbons", 1, 12, 12);
BaseMA := Mov(C,Periods+(Spacing*0),S);
If(Ribbons>=2,Mov(C,Periods+(Spacing*1),S),BaseMA);
If(Ribbons>=3,Mov(C,Periods+(Spacing*2),S),BaseMA);
If(Ribbons>=4,Mov(C,Periods+(Spacing*3),S),BaseMA);
If(Ribbons>=5,Mov(C,Periods+(Spacing*4),S),BaseMA);
If(Ribbons>=6,Mov(C,Periods+(Spacing*5),S),BaseMA);
If(Ribbons>=7,Mov(C,Periods+(Spacing*6),S),BaseMA);
If(Ribbons>=8,Mov(C,Periods+(Spacing*7),S),BaseMA);
If(Ribbons>=9,Mov(C,Periods+(Spacing*8),S),BaseMA);
If(Ribbons>=10,Mov(C,Periods+(Spacing*9),S),BaseMA);
If(Ribbons>=11,Mov(C,Periods+(Spacing*10),S),BaseMA);
If(Ribbons>=12,Mov(C,Periods+(Spacing*11),S),BaseMA);
Open a 30 minute chart with the clean template and drop this
indicator on top of it just like you were using a moving average,
which you are. The default values are good enough for now. Set up a
template so you can scan a number of stocks with it.
You will see that when the price breaks out above or below the
ribbon, it will keep it's momentum until it breaks down and returns
to the ribbon, finds support and reverses or breaks through the
ribbon. The same is true on the down side.
When you have a stock that's breaking through the ribbons (both up
and down), it's good for some small gains. To profit from these moves
you have to setup some trading rules. Keep them simple.
1. Set a profit target. If the target is met, get out even if the
trend is continuing upward. The slope of the bands tell you the
strength of the trend and the likely hood it will continue.
2. Exit the stock if it starts moving sideways in a trading range
pattern.
2. Absolutely get out if the price turns back toward the bands and is
heading toward them in a steep decline (or rise) or if it touches the
bands.
The point here is to make money, not ride the trend until it's
exhausted.
Don't email me asking for an exploer program to find the 10 stocks
that are on the edge of the ribbon. You don't need one.
Take 100 of your favorite stocks, open 30 minute charts on them with
this indicator in each one, and you'll see which ones are good
candidates for the next day. In addition, most stocks will move
through the bands several times over several days on a 30 min chart.
Of course, they will move more often through the bands on 10 min
charts but the moves are usually shorter.
I'm sure there's plenty of "boo" birds who want to take exception
with what I'm saying. If you feel the need to comment, make the
comments constructive rather than trying to impress everyone with how
big your ego is. For those half wits that show up here sometimes--
constructive means providing alternatives that help "everyone" learn
better ways to do things, not embarrass or put them down.
Now that that's out of the way, check it out. It's an easy method for
beginners to use (I use it, and I've been trading for a living for
several years.)
You can also use it to learn how to read your indicators. Basically
your indicators should be picking up the price moves slightly before
a stock enters the bands or when it's in the middle but hasn't broken
out yet.
Some people will argue you can use one or two moving averages and
accomplish the same thing. That's true, you can. However, this method
is simple and works well. I think it can help break the habit of
wanting to only buy bottoms and sell tops. You'll grow old and poor
trying to do that. By the time the a stock breaks through the bands,
it's a long way from it's bottom, and if you stick to the trading
rules you'll never sell it at it's top.
Sometimes I compare my other systems against something simple like
this to see how efficient they are over the basics. I have sadly
found that often I don't need to bother with whatever brilliant idea
I just got, when I can make more money just keeping it simple.
Don't over analyze. Don't complicate the decisions. Follow the three
trading rules--write them down and glue them to your computer screen--
and at the end of the day you will be up for the day. You won't have
made the maximum on each trade, but you will have had many more
profitable trades than unprofitable ones.
Give it a try. Be conservative and be careful.
Good luck!
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