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In posts over the last year or two I've mentioned the advantages that
come from trading from a list of prescreened stocks.
For trend traders, momemtum traders, hobby traders and other people
who don't rely solely on a specific chart setup or pattern, trading
from a list of stocks that have unusually good fundementals, quant
scores or other attributes is significantly better than trading from a
list generated by an exploration.
(Before you ask, yes I've tested all of this many times on many lists,
but you can test it all yourself and see what I'm talking about.
There's nothing a TA person likes to do more than reinvent the wheel.)
Several of the good lists I have mentioned are the Valueline
Timeliness 100 stocks, the IBD top 100, the S&P Neural Fair Value 25,
the S&P Platinum List, AAII Stock Investor Pro and the Ford Equity
Research top 20.
These stocks are screened using well tested techniques that have many,
many years of actual trading results to back them up. In every case,
it's recommended you buy the list and then replace the ones they tell
you to replace every week or every month.
However, if you're worth a crap at TA you can improve the results
(which are good already) using your charts to buy the ones from the
list that are looking good.
Don't worry about catching the trend on the first bar. These are high
momemtum stocks that tend to trend for awhile. Just buy them whereever
they are in the trend using whatever magical trend detection tools you
have.
All of these list require you to subscribe. Since I know there are a
lot of people on here who are too tight with a buck to pay for
anything, here's a source you can use to create lists of prescreened
stocks and it's FREE, FREE, FREE. I know some of you get dizzy just
hearing those words, FREE, FREE, FREE.
The screening program is called StockScouter.
You can find it at:
http://moneycentral.msn.com/investor/finder/customstocksdl.asp
Scroll down to the bottom of the page and click on Deluxe Stock Screener.
Install the Investment tool box, which comes with a free picture of
Bill Gates, in the nude.
Once you have that installed, turn off your computer and go to Barnes
and Noble and get a copy of Swing Trading: Power Strategies to Cut
Risk and Boost Profits by Jon Markman.
In there Markman has a collection of his articles on the screener, how
to use it and the backtested historical results. If you bring a pad of
paper and a pen, you can copy all of the information down without
buying the book so we have not violated the FREE, FREE, FREE principle
we set out to obey like a zealot.
YOU CAN NOT USE THE SCREENER EFFECTIVELY UNTIL YOU SEE WHAT
CONSTRAINTS ARE REQUIRED TO GET GOOD PERFORMANCE OUT OF IT. THEY ARE
NOT OBVIOUS OR INTUITIVE, SO DON'T SKIP THE BOOK READING STEP, OR YOU
WILL FAIL AND WIND UP LOOKING LIKE A LAZY INGRATE MORON.
(I know the use of the word moron deeply offends some of the liberals
out there so let me beg for your forgiveness now. Beg, Beg, Beg. Now
that I have your forgiveness we can move on.)
The screener will give you a list of around 50 or so stocks a month
that are likely to outperform the market. You can read the stats in
the book to see the backtested historical results and the live trading
results from the last couple of years.
I've been fooling around with this tool and the lists for awhile, and
so far I'm thinking it is pretty good.
While I'm not ready to give up my other lists yet, for those of you
who don't have a list, you have nothing to give up!
Don't be fooled by the word outperform. If the market goes down by 58%
and the list only goes down by only 56%, then the list outperformed
the market. Using TA you should only lose say 40% that particular
month. So you will really have outperformed the market and it will be
time to start a hedge fund of your own.
Some of you might ask: if this is so good why don't mutual funds use
lists like these to find their stocks. A lot of them do. Ford Equity
Research, S&P, Gradient and others supply a number of screening tools
to mutual fund managers that work exactly like these do.
Now that you understand everything about prescreened lists, you can
stop thrashing around looking for exploration code that's going to
find you 8 out 10 winners and go with something that actually works.
In a downtrend, nothing is going to find stochs that will make much of
a profit going long. While these lists don't recommend shorts, I have
found that when the market goes down, some of their high performing
stocks make good shorts.
Presreened stocks don't come with a box of tissues for handling those
misty moments when you realize that even with a list as golden as
these you still can't make a dime.
Don't email me asking me where you can find these lists. That's what
Google is for. Learn to use it.
www.valueline.com
www.aaii.com
www.fordequity.com
www.spoutlookonline.com
www.investors.com
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