A Chart Template for Mutual Funds

Mutual funds price once a day, at end of day (EOD), and they don’t report volume. But orders --to buy or to sell-- have to be submitted BEFORE market close. So you never know what price you’re going to get (though there are ways to make a good guess). If mutual funds are charted with the same types of bars used for stocks or ETFs, this is what a chart might look like (assuming colored OHLC bars are used).

Pretty hard to tell what’s going on, right? But things can be improved hugely by adding a 1-period, simple moving average (SMA) to connect the dashed lines.

If the HA Smoothed indicator is added, the trends become obvious, and the actual prices can still be seen.


chart 3

Let’s take a closer look at that chart. There are four segments (or waves) to it. A rising wave, followed by a falling waved, followed by another rising wave, followed by a (still ongoing) falling wave. 1-2-3-4. Simple. Surf’s up, right? However, let’s zoom in some more and try to see where it might have been prudent to get onboard wave #3.

Quill argues that the ‘Buy’ rule is simple. Get in when the bars turn from ‘red’ to ‘green’. This time, doing so would mean you caught a low price that the next day’s higher price would have created a fat profit for you, and you’d feel like a trading genius. But prices fall the next day, and the day after that. So, now you should be getting worried they’ll fall a third day and, maybe, a fourth. What to do? This is where/when you need to decide how much “wiggle room” you’re going to allow yourself. Said another way, “At what point do you cut your losses?” Are there any indicators that might help you make a decision? In fact, there are, as the following chart suggests.

Again, look at the middle of the chart with Quill’s 'Buy" rule in mind. He says, 'buy when the bars turn from ‘red’ to ‘green’. Note, also, that underneath the first green bar you see (following the second wave --which was a falling one-- there’s a fat green dot. That setup is as good a ‘buy’ signal as you’re going to get, and the signal should be acted on. On that, Quill and I would agree. You don’t hang around waiting to accumulate more evidence. Or in Ben Graham talk, you accept ‘information-risk’ to reduce ‘price risk’. (And if he didn’t say it, then Justin Mamis sure does in his book, The Nature of Risk.

Back to the chart. We got in on a solid signal. However, the following day, the dot turns ‘red’, and it jumps on top of the HA bar. Opps. What’s going on? Simple. The SAR indicator (which BC calls Parabolic Time/Price) says the trend has switched back to ‘down’. Therefore, if you’re a panicky, Chicken Little trader like me, you’d get out the following day. However, if you’re a bold and brave trader with stones like Quill, you’d stay with the position, because you’re still in the money (ITM) on it, and the HA bars are still printing ‘green’.

Therefore, I’d suggest that this investing/trading stuff isn’t just about seeing an opportunity and trying to jump on it, but a matter of knowing who you are and how you manage risk. How are you going to discover that? By charting lots of examples of whatever it is you intend to invest in and doing these sorts of “What if’s?” when the chart is at the “hard, right-hand side of the page” and you can’t see what the next day’s price will be.

What I predict you’ll find is this. Quill’s rule will make you money, on average and over the long haul, because the rule comes from his decades of market experience, and he’s the best trader you’re ever going to meet. However, I would also predict that if you add PATP as a filter and only take trades where HA Smoothie and PARTP are BOTH in synch, and always get out when they disagee, you’ll cut your loss-rate. But what doing so WON’T do is increase your overal profitability. ‘Fast-on/fast-out’ means smaller losses, but it also means smaller profits. That’s just how the numbers work out, and that’s what decades of studies done on investing and investors report. The big money goes to them who can tolerate big drawdowns. (Look up Dennis Ritchie and the Turtles Method.)

I’ve run enough back-tests to know --for my own comfort and sanity-- I need to filter my signals rather than depend on HA Smoothie alone. What you decide to do should be based on what you can prove to yourself might work best for you and your own personality, and it might well involve an entirely different way of charting stocks and an entirely different rule set.

There is no “one best way” to do any of this stuff. There is only what works for you.

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Assuming you are pointing at the two (2) green DoJi’s bars. Green Doji’s generally the next bar will be heading north. Sometimes there are two (2) Doji’s in a row or more as the size gets smaller and smaller to the final Doji, then the following bar will most likely be red and heading south.
If there are red Doji’s then will indicate the next bar might be heading south.

Doji’s are a pain in the neck and slow the decision process a little. I tend to stick to the buy sell rules.

If you see the stock TEX, it will show the example.
The WICKS on the white background are faint and some traders can 't see them. On the flip charts, the wicks are brighter. Better with the Mode tab set to black background.

I made an error to some students and the rules should read:

a. BUY on the First GREEN Bar after the Last RED bar. No waiting.
b. SELL on the First RED Bar after the Last GREEN bar. No waiting.

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“Doji’s are a pain in the neck and slow the decision process a little. I tend to stick to the buy sell rules.”

Quill,

Au contraire, mon ami. Doji’s make the the decision process easier, because they offer a high degree of predictability that they are, in fact, a turning point. This is easy to see when hollow candle sticks are used. Not so much with HA bars. But here’s a workaround.

There are lots of different dojis: gravestone, long-legged, dragonfly, etc. that Investopedia does good job of covering and whose common --and defining-- feature is that the ‘open’ and ‘close’ for the price bar are equal, or nearly so. What Is a Doji Candle Pattern, and What Does It Tell You?

BarChart flags dojis by how it colors the volume bars, making them ‘blue’ instead of ‘red’ or ‘green’. Here’s and example when hollow candle stocks are chosen for the bar type.

Here’s that same ETF plotted with HA Smoothie to which volume bars have been added.

Arindam

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Quillpenn,

Had a query…

Am I right that you use this rule only after the smiley face/ price label kicks in?..and not anytime we see a reversal from the last red to first green?

Also, Am I right in understanding that the smiley face (regardless of whether it is for the buy or sell ) would depend on the time period we choose ( since the lowest price in say a 3 month period may differ from that of a 1 year period )…So, would you say that you use these signals mainly with the 2 month time frame regardless of the overall trend.

Thanks a lot,
Charlie

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Charlie,

I’ll leave it to Quill to defend his use of those smiley faces. But I think they are clutter and a distraction. He, OTOH, doesn’t make use of volume bars, whereas I think they are important.

In short, all of this stuff is ‘Chef’s Choice’.

Arindam

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re: Barchart
re: RBLX that I currently own.
re: CABA
re: HA Smoothie
re: drivers Ed.
re: 2.5 percent theory at another way of making a kewl 4.4 mil.

I only use the two (2) month charts. There is plenty of information to make an informed decision.
We are Swing Traders, not HODlers to be in and out and move on or wait for the next signal. I showed my wife the chart and pretended she was driving a car. On 12/15 she jammed on the brakes at the stop sign. She waited and waited for the Green traffic light to come on.
On 12/30, she saw the Greenlight come on and she stomped on the gas or EV pedal to move on up the hill. If you notice, she has to stop at the next stop sign. The speed zone is 35 mph. ;o)).

The smiley faces can be used for buying and selling per Simon’s II rules. if you like. Buy or sell the next day after the Arc is posted as an option.
It does not matter what timetable you use, the results are still the same. There are times I like to use 3-month charts as a reference of time.

Look at CABA on 10/04/22 on a 4-month chart currently, but bought on a 2-month chart. 10,000 shares and have to wait until the next sell signal comes. Had a minor speed bump and Simon Sez to continue on. :o))

What do I do now? I could stop Swing Trading for the rest of the year and it is only January.
However, I swing trade using the 2.5 percent theory for fun.
https://www.barchart.com/stocks/performance/five-day-gainers/advances?viewName=main&orderBy=percentChange5d&orderDir=desc
clicked on the 5D avg vol column for the highest volume goes to the top.
looked on the % chg column and look for stocks greater than 2.5 percent
clicked on the + for STTK and then clicked on quote and noticed all %chg is greater than 3 percent.
buy at market order
sell at market order GTC.
always have a hard time choosing among a half a dozen choices.
HA Smoothie says I could have bought STTK yesterday. Figure STTK will have a 5-day run. However, I have to sell after a 2.5 percent profit plus rounding up to the nearest nickel.
Dems are the rules.

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Awesome, thank you so much.
Charlie

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Hi Quill,
I have a question if you do not mind. When using this and looking at the stock, since it is 5 days obviously you are going to be at least 5 days away from the upturn in the stock. So looking at a chart how long into the green do you want to be? Do you have a rule on this?

Andy

Andy,

I think I made a typo error concerning.

“SELL at market order GTC”, it should read Limit SELL order GTC (good to cancel) at the target price.

Guessing the stock will rise based on past performance on February of last year. Also look at the volume pattern

If you’re trading to earn 2.5 % theory plus, just hit the target price and out.

If you still want to continue, stay with the flow until you see the next RED bar and out. The last high was around 8.00 area.
new Suggested
price Times price per Selling Sell @
Ticker per share 2.5% share Price * Round UP
abc 7.82 0.20 8.02 8.03 $8.05
xyz 4.84 0.12 4.96 4.97 $5.00

The 2.5 % theory starts off with $500.00 locked in from the start of Day 1 per the Spread sheet.

now whenever you get to Day 365, you should have earned over $4,103,479.00Iam only on day 100.

Starting with $1,000.00 - now whenever you get to Day 365, you should have earned over $ 8,207,499.56
Starting with $2,000.00 - now whenever you get to Day 365, you should have earned over $ 16,414,995.12. Not too shabby.

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going to try a test if the old pre and /pre with n the carrots still works for column numbers.

	 
                        Ask		                          new	         Suggested	
		        price	        Times	price per	Selling	Sell @ 
	Ticker	per share	 2.5%	share	Price *	Round UP
	abc	7.82	0.20	8.02	8.03	 $8.05 
	xyz	4.84	0.12	4.96	4.97	 $5.00 

Just a test

Perfect the pre and the /pre work within the < >.
pre at the top line of the numbered data
/pre at the bottom line of the numbered columns.

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