The following is from a recent email I swapped with him where the ticker for the stock under discussion has been omitted, because it’s irrelevant.
"Scroll the chart back, and you’ll see the first green arrow is placed per basic Simon rules. I.e., a green bar follows a lookback low. So, get in at next day’s open.
Jul 9 is the ‘Lookback-low’ day.
Jul 10 is the confirming ‘Wait One’ day.
Jul 11 is the ‘Action’ day.
Yeah, you’re right. On Jul 10, neither TTM nor StochRSI confirm. But that’s often the case. So, do this. If only the ‘Wait One’ rule confirms, rate the trade as ‘Risky, but doable’. If Wait One, and TTM, and StochRSI confirm, then rate the trade as “Shooting fish in a barrel”. Next, do this, If you rate the trade as “Risky”, then bet small money. If “Shooting fish”, then bet bigger money.
Obviously, there has to be a middle rating as well where confirmation signals are mixed. Said another way, all potential trades could be rated as:
A Risky Buy (1 in 5 odds of working )
A Probably Safe Buy (3 in 5 odds of working)
A Nearly Certain Buy (4.5 in 5 odds of working)
The same could be done for exits:
- Sit tight. (Nothing to worry about.) (4.5 chances in 5 that prices will continue higher)
- Retreat. (Prices might head higher, but the prudent move is to exit now.) (2.0 chance in 5 of prices going higher)
- Cut losses. (Get out NOW before things get even worse.) (0.5 chance in 5 of prices improving)
The previous is just a small part of a campaign I’m putting together for this Fall’s trading season. Make of it what you will.
Charlie
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Arindam, sounds like a reasonable approach and I will probably give it a try. I have demonstrated the simple StockCharts label method of SS3 has a very poor probability of working without some other secret sauce of experience and intuition. I was going to try HA for a few months, but this sounds better.
I imagine you are thinking that if you start out with a “Risky” trade, and then it gets confirmed, then you would add more money to the trade, right?
Thanks, good idea.
Pete,
BINGO! You nailed it. While I was running chores, it occurred to me that really four “grades” are needed for both entries and exits. For entries, when one is at the hard, right-hand edge of a chart, one’s judgment of the facts can take any of four paths:
- PASS.
- BUY SMALL (because it’s a weakly evidenced setup)
- BUY DEFAULT SIZE (because the evidence is pretty solid)
- BUY BIG (because the evidence is really, really strong and unwinding the position would be easy (where '“big” --in my case-- would never be greater than a 2% exposure.)
When grading ongoing, open positions, four actions are possible:
- ADVANCE (i.e., average up)
- SIT TIGHT
- RETREAT (sell most or all in advance of suffering a possible loss.)
- CAPITULATE (immediately go flat and then figure out whether it coulda/shoulda been anticipated and avoided.)
Do you play Euchre or a similar game were there’s no bluffing and where card-counting matters? Sometimes a hand that should have won the trick doesn’t, yet the same hand has to be played the same way every time. Trading is no different. You trade the chart, but know full well that exogenous events can undo even the most carefully analyzed or skillfully executed of trades.
As for SS3 (or any of Quill’s versions), I totally disagree that any “secret sauce” is needed for his method(s) to turn a profit, on average and over the long haul, because his method all but ensures that one is always buying low and selling high. For sure, in choppy markets or with twitchy stocks, there are going to be whipsaws. But, like, duh! If that were not the case, there’d be no money to be made from either investing or trading. ‘Risk’ (aka, ‘uncertainty’) is what makes profits possible. The trick --as Mamis argues-- is knowing (or learning) when to accept ‘information risk’ in order to reduce ‘price risk’.
Charlie
PS Actually, with ongoing positions, especially those that aren’t working, there is a fifth possible action summed up in this proverb.
“Good traders cut their losses. Great traders reverse.”
Soros, in his younger days, was especially adept at this.
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I don’t think that is true at all. I have demonstrated buying low properly using Rule #1 only to have the stock go down almost immediately and the low-label to vanish to replaced by a new low label. I have demonstrated a number of cases of positive action, only to see the stock give it all up before Rule #2 kicks in. I don’t get any feedback that my buys using Rule #1 were improper. I don’t get any feeling SS3 using low-labels on StockCharts can produce anywhere near the results Quill gets using the same rules.
I have provided real-time results for ALL my SS3 trades for others to learn from. I urge @Quillnpenn to record his next 10 trades in near real-time (same day) so that I can try and decipher how he and his 10 year old grandson can have such a staggering batting average. That would be a wonderful teaching gift to everyone.
But that is not the point of your thread and I will move on to thinking about your approach and if I switch to it, I will post my real-time results so I can be taught what I am doing wrong.
Pete.
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“…will post my real-time results so I can be taught what I am doing wrong.”
Pete,
As Schwager amply demonstraded in his series on Market Wizards, there is no “right” nor “wrong” about any of this trading stuff. There is only what works (or doesn’t) for each individual trader. Specifically, if you can’t make your understanding of what you think Quill is saying work for you, then back away from trying, because you’re wasting your time (and his).
I’ve spent days and days trying to break his method, and I can’t. Quill’s method is simple. Quill’s method is solid. Quill’s method makes me money, whereas a method you favor, IBD, I regard as being mostly risky nonsense that depends on having the winds of bull market at its back to make it work, which is exactly when nearly anything --including dart throwing-- works perfectly well.
But to each, his own , right?
Charlie
Pete have you tried using SS with RS? Let’s look at CELH, one that has been falling and I missed it with SS. SS showed a buy signal but it just kept falling. I assume that would be the low label vanishing. But look at it here. With SS.
It looks like I am a day late but still buyable. Now here is IBD.
Now see how it is finally turning up? Don’t grade this with IBD because obviously it has a way to low RS but with SS it looks like a win. So maybe with SS a buy rule might be buy after first smile but make sure RS is moving up? Just a thought.
Andy, I have not tried that. Webby convinced me to put RS trendlines on my charts, so maybe those could come into play also. I do have some experimenting to do.
