For a beginner, having money to invest isn’t their biggest problem. Their biggest problem is knowing what might be worth buying and when it should be sold. (IMHO, 'natch.)
Using Quill’s Simple Simon method (any version) solves that problem. But then comes the tedious work of scanning charts to find what might worth buying. Five positions is as about as many as a beginner can keep track of, and even just two might be plenty. So, if you who lurk in this forum were to suggest two things that might be worth buying tomorrow, what would they be?
Here’s my list: Go long precious metals. Short the broad market. Once I’ve done my weekend, back-office work of marking myself to market and setting up my Treasury buys, I’ll get more specific. and to tickers. Meanwhile, let’s hear from you.
Arindam
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Charts say that gold is five days into its move. By my rules, that’s too late to chase. But copper and uranium might be worth looking at. Overlay a chart of the ETF for copper miners, COPX, with charts of the ETFs for uranium miners. Same-same. So both don’t need to be traded. Here’s the holdings for them. (I own 'em both, but I think URNM might be the better bet for its smaller position in CCJ.)
Here are some more mining ETFs that might be worth tracking: XME, REMX, PICK, GMET, LIT. And speaking of lithium, here’s a Fool article to touches on the topic, though all of its mentions are currently a ‘PASS’, just as they were when the article was published.
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Hi Arindam,
Thanks for this. Had a query…Are we now witnessing a reverse rotation out of all those which worked last year ( energy, health care, commodities ) into things that were pummeled (tech stocks)…seems like the last years winners are all lagging this year…
Also, with regards to the commodities, and in this case, the miners, aren’t they too vulnerable in the face of an impending recession ( wouldn’t everything goes down)…
Thanks again for sharing your thoughts and knowledge.
Charlie
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If you were looking to day trade it, would you set a stop loss ( do u use a percentage) or watch it and then trade out when you feel it is apt to do so…or you feel this is a longish trade…swing trade for a few days/ weeks or even a much longer trade based on the flight to safety.
I am trying to learn the risk management thought process here, rather than anything else…the way you think about any trade…using this as an example
Thanks again
Charlie
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Charlie,
You gotta deeper. When did ‘energy’ --as might be traded via XLE-- top out? Hit a high in June and then declined. Hit a slightly higher high in Nov and then rolled over. Commodities --as might be tracked by DBC-- hit a high in June and then rolled over. Tech --which might be traded with XLK-- hit its high in Dec 2021 and fell all of 2022.
In short, don’t paint everything with a broad brush. Look at what’s actually happening in each industry and sector. E.g., sugar --tracked by CANE-- is still climbing from its May 2020 low and is up 105%. That’s killer money.
Why has gold perked up in the last five days? Probably as a response to uncertainties in the banking sector, never mind that all central banks are buying it by the ton, all the while still publicly denying that only gold is money. Also, the PMs are seen as inflation hedges, and inflation is on the rise, now that the Fed has decided to bail out the banksters once again.
In short, and as always, it’s fundamental that make the chart, but it’s the charts that have to be traded off of.
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Awesome, as usual! Thanks Arindam…that makes a lot of sense!!
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Charlie,
Risk-management is a huge and controversial topic. Wm O’Neil --a ‘momentum’ trader for whom I have the greatest respect, but whose methods make no sense to me as a ‘value’ investor-- advocates for a fixed, 8% hard stop. Others say that stop placement should be based by on the structural features of a chart, such as Support and Resistance, or on the basis of the stock’s volatility using StdDevs, ATRs, or indicators like Bollinger Bands, Keltner Channels, etc. Still others say to get out on a reversal of the reasons that got you in, which seems to be Quill’s preferred method. You won’t want to hear this, but I use my reading of the tape. If prices go into a stall, I admit I’m wrong and get out.
In short, you’ve gotta decide what makes sense to you based on what you can do when markets are open. If you’ve got a day job, then using stops make a lotta sense. If you can be on a screen, then not using them can be done. One order type you might consider is an OCO in which a profit target and a stop losses can be set at the same time. If one leg gets triggered, the other is canceled. Hence its name, OrderCancelsOrder. They’re easy to set up using Think or Swim. Schwab probably has a means of setting them up as well.
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Charlie,
Here’s another method for setting stops. Decide in advance how much grief you’re willing to tolerate if prices move against you. If you’d be happy to make 50 to 80 bps on a position in a single day, which is very decent money, then don’t let prices move against you by more than half of that. If your right/wrong ratio across all of your trades is 1:2 --which is the typical profile of a trend-following system–, then at least you’ve scratched. OTOH, if you’re chopping left-hand tails aggressively and letting your winners run --Easy to say. Hard to do-- then you’re pulling more money out of markets than you bring to them.
So, also do this. Make your opening position small, maybe just 1/6th of the total intended position. If the market confirms that your entry was correct, then average up by doubling or tripling your position and raise your stop. If prices continue to run in your favor, add a second time in an amount equal to your opening position, but start looking where to get out. If prices still continue to run, sell half to lock in your profits and tighten up your stop. Yeah, you’re going to leave money on the table. But you’re also going to be able to sleep at night.
As for figuring profits, there are 250 market days per year. If you make just a measly 4 bps per day on a position, that’s a gain of 10%, or the long-term historical return offered by stocks. If a trade offers 5% or 10% --or a whopping 78% as my trade on WAL did-- park the money and let it have a deserved vacation.
Trying to trade every day will kill your account, because investing is no different than fishing. Sometimes, the bite is on, and any thing will catch fish. Other times, you’re wasting you’re time to be on the water. Markets are no different. There are times to be in there buying. There are times to be standing aside. (And it’s hard for a beginner to know when is which, but that comes with time.)
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Monday 3/20/23
Courtesy from TradersPRO
Stockcharts out of the gate
Barchart Five day gainers
ALGM - 45.57
CPRT - 69.92
RELX - 31.22
TPH - 24.43
ACLS - 128.43
CPRX - 16.30
AGI - 11.36
The below are run twice a day am and pm via Stockcharts scanning tools.
//Bullish Scan 400 True Strength Index up and over
[type = stock] AND [country = US]
and [SCTR > 90]
AND [Daily EMA(20,Daily Volume) > 40000]
AND [Daily EMA(60,Daily Close) > 20]
AND [TSI(16,8,4) > 0]
AND [TSI(16,8,4) x TSI Signal(16,8,4)]
//Bearish Scan 401 Bearish True Strength Index
[type = stock] AND [country = US]
and [SCTR > 90]
AND [Daily ema(20,Daily Volume) > 40000]
AND [Daily ema(60,Daily Close) > 20]
AND [TSI(16,8,4) < 0]
AND [TSI Signal(16,8,4) x TSI(16,8,4)]
//and [group is SP600]
//and [favorites list is 50] // SPDR’S Line
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Hi Quill,
Thanks a lot for this…Have these all already gone past our buy entry point based on the Simon sez rules
For example ALGM
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However, I think what you are saying is that the momentum is on this, and so even though the ideal entry points have all long gone, if one is agile enough, you buy and sell quickly…Is that what you are doing here?
Thanks again
Charlie
Charlie,
Do NOT get sucked into the momentum game. That’s exactly how you lost money before. Instead, get six sheets of clean, white typing paper and in big, bold block letters print on them the mantra below and hang one on every wall of your house.
SKATE TO WHERE THE PUCK IS GOING TO BE,
NOT TO WHERE IT IS RIGHT NOW.
[more on this later after market close.]
OK. I’ll do what I shouldn’t, nor should you act on. But buy 1 share of IGD and then let’s talk.
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Thanks Arindam. Yes, totally agree…I wish I can say “Once bitten, twice shy”…but no, that would not be true as I have lost multiple times, although I wasnt even aware why…
I was trying to learn how Quill was approaching… Obviously Quill is brilliant in his methods, and I guess he must be clearly having and entry and exit point for these trades…I am guessing that these dont fall in his Simon says methods…
And I actually like the Simon Says methods that Quill uses and also the ones you have articulated before with variations in the chart features…precisely for the reason you mentioned…At least, if I use that, I may buy at a relatively lower price and sell higher…
At this stage, I am only learning…So, I am not going to astray…
My only disgust (with me alone) is why I did not do this BEFORE I got myself into this mess! Hopefully, it is not too late!!! Optimism shall prevail!
Charlie,
The ‘Simon’ method is solid. It’s a breakout method that tries to ‘buy low and sell high’, as opposed to ‘buying high and selling higher’ (aka, bet on momentum). If you want to trade 'Mo, then work your way through Wm O’Neil’s books. If you want to trade breakouts, then stick Ben Graham’s The Intelligent Investor. But don’t ty to mix the methods. You’ll just chop your account to pieces.
Also stop beating yourself up over things that cannot be redone. Your past losses are water under the bridge. Right now, you’ve got a choice. Either you get back in the game, or you walk away and forget about investing entirely, for it being a high-risk performance sport --like rock climb or hang gliding-- that no one ever truly needs to do.
NB: By 'investing", I don’t mean budgeting, financial planning, and cash-management. Those chores are simply a part of adult life, same-same as brushing one’s teeth. ‘Investing’ is socialized gambling that this country abets. Some do it well. Most don’t, and they should walk away from the equity casinos.
Arindam
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I tell myself and others that losses are the price of education if you learn something from the experience…doc
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Note the bottom panel for the confirmation signal to buy
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Quill,
What stock are you talking about?
Thanks Quill…do you mean where the green line crosses the red line, like here
sorry should have re:
re: Algm
re: Relx sell when the next sell signal occurs.
re: Relx - yes you are correct at the Arrow.
re: OSIS ran away from me. Up to fast. It will come back down.
" Trade What YOU SEE, Not what you think" - by Markus Heitkoetter at https://pxo.rockwelltrading.com/
When I get back, going to post the Simon Sez III rules again and maybe Simon Sez II and Petty Ca$h rules for the dare devils who need some pocket change in 6 or less days. Simply buy Out of the Gate as day one and sell on the sixth day no matter what.
Trying to find Simon Sez IV related to the Heikin-Ashi charts or HA Smoothie charts.
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