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Put this Conner's strategy in the systems tester, and you'll quickly
figure out it's only a so, so way to trade.
Connors wrote Trading Connors Vix Reversals also. (Along with some
other books I've read.) I've programmed and tested all of those and
Connors is right that a slight trend change often occurs after one of
the many vix signals he uses. What he doesn't tell you is how hard
these are to trade and make any money on.
I've found that a simple moving average works much, much better than
any thing in any of Connors books or from the other books by the
guru's of trading, and I've read nearly all of them. All indicators
are so, so. All set ups are ify at best. (The only indicators I would
consider paring with the moving average, if you feel you need other
indicators, is the ones from John Clayburg's Four Steps to Trading
Success. If you use those the way he tells you and you don't try
turning them into binary wonder boys, they work well on any time
frame, in any market you want to trade and they're simple.)
The best, most consistent and most profitable strategy is to buy a
large group of momentum stocks when the market is in an up trend, and
the up trend is defined with nothing more than a moving average or
two. I like Kaufman's AMA for daily charts. It tells you far more than
T3 and the rest of the so called lagless indicators. For example it
goes flat during periods of noise and price consolidation. T3, T%, T17
and T42 don't.
If you don't know how to find momentum stocks, you can get a good
trading list from IBD, Valueline T1 stocks or S&P's neural fair value
or Platinum list. Using these lists keeps you focused on a group of
manable stocks. Lack of focus is one reason traders fail to make
money. You can trash around trying to look at 3000 stocks everyday to
find something to trade.
If you want to short the market when the trend turns down, take the
same set of momemtum stocks you just sold, and short them when the
momemtum fails and they pull back.
It's that simple. But you don't have to take my word for it, you can
search the hills and valleys for every trick pony grazing there.
If you want to trade the QQQQs or the SPY, there's a really accurate
way to create a couple of indicators to tell you exactly how those
stocks are going to act. Maybe those indicators will show up in Roy's
newsletter. If you want to know how to do that, you can subscribe. The
two indicators I use blow away anything Connors has by a mile.
Have fun!
--- In Metastockusers@xxxxxxxxxxxxxxx, "marcboe77" <mboella@xxxx> wrote:
>
> In the Dec 2004 issue of Stocks and Commodities, Larry Conners
> outlines his strategy which is based on buying into weakness and
> selling into strength, which is contrary to traditional wisdom.
>
> - if the S&P 500 makes a new 10-day low, then buy and hold for some
> 5 days.
> - this is reinforced if the short-term pullback is above the 200-day
> moving average.
>
> He also suggests that if the VIX (volatility index) is 5% below its
> 10-period moving average then the market is due to consolidate or go
> down.
>
> If the VIX is 5% (or even better 10%)above its 10-day moving average
> then it indicates potentially big gains.
>
> Finally, he suggests using the 10-period ADX to indicates whether
> the market is trending or consolidating.
>
> Marc
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