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Author: VyckieB Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6326  
Subject: My trading strategy..feel free to critique ô¿ô Date: 2/19/2005 11:19 PM
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Okay - I've been immersed in developing my own personal trading strategy that will work best for me. Here's what I've come up with so far - a combination of Fundamental Analysis, Technical Analysis, and Intuition (!) I would greatly appreciate any feedback fellow Fools would care to offer as well as additional tips that might help me make improvements.

Step 1 - Fundamental Analysis

Okay - I admit that I don't have a lot of time or patience for Fundamental Analysis! That's why I subscribe to these boards and also to Hidden Gems. I also subscribe to the Bowser Report (www.thebowserreport.com), a newsletter focusing on mini-priced stocks. I have purchased The Bowser Directory of Small Stocks. Bowser does Fundamental Analysis on small- or micro-caps and gives them a rating based on 12 key fundamentals. (BTW, Karen - RELV was a Bowser pick.) From these sources, I choose the companies that seem compelling to me.

Step 2 - Technical Analysis

I have several screens that I run potential companies through - I always start here:

http://tinyurl.com/4n5bo - This screen tells me the general direction that the stock is heading in the long run. If the price objective is not "bullish" I pass (usually).

Next, I go here:

http://tinyurl.com/4c793 - This screen gives me a shorter term (3 month) indication of where the stock is headed. I look for a narrowing of the Bollinger Bands, 50-day MA above 200-day MA, Parabolic Sar should be green (those sweet little dots), I also like to see the Stochs heading towards the 80 line or possibly above - if the Stochs have been above the 80 for very long that tells me this stock may be nearly oversold - the %K line (blue) should be above the %D line (red). On this screen I also like to "step back" and notice the general movement of the stock - does it follow a fairly predictable pattern - or is it erratic which would make it more difficult to read?

Next stop:

http://tinyurl.com/5r89w - This screen is a better indicator of the short-term (daily) stock movement. First, I look at the ADX line - I like to see it slanting upwards. The green +AD line should be above the -AD line and preferably above the ADX line as well. The daily price change is very useful in estimating the momentum of the stock price - higher lows tell me that a downtrend is possibly reversing - lower highs tell me that the bullish trend is losing momentum and the stock is nearing its peak.

I also like this chart:

http://tinyurl.com/5f7rd - This one is a little harder to read, but used in combination with the others it can help confirm the trend that I'm seeing for the stock that I'm analyzing. The 10-day EMA must be above the 50-day EMA - I've learned the hard way that it's not good enough for the 10-day to be just breaking through the 50-day EMA - now I wait until it's well above and the trend is definitely established. I've bought too soon only to watch the 10-day fall right back below the 50-day - ouch!

I also watch those little intraday price bars - generally, when a bar drops below the 50-day EMA within a short time the 10-day EMA follows and the downtrend is established. This is also a good place to take a "big picture" view of the price movement of the stock - is it generally going up? Or does it bounce around all over the place, making it a riskier trade?

The Stoch lines can also be helpful - but I find that it's not too predictive - it usually only tells me what's going on in retrospect.

One final check:

http://tinyurl.com/4552j - Now this screen is for the VERY near term! There's a lot of info. presented and oftentimes these indicators will contradict each other - for that reason, I pay much more attention to the previous screens and save this for last because what I've already learned on those screens helps me to interpret this screen.

The last thing I do is check for recent news that might affect the price - are earnings due out soon?, etc. (You can check for earnings here: www.earningswhispers.com)

That's it for my TA. I hope I'm not boring you to tears!

Now for ... Vyckie's Always Evolving Trading Strategy ‹(ô¿ô)›

First, I remind myself that I only need a small gain over and over to make the magic of compounding work for my portfolio - here's a revolutionary chart: http://tinyurl.com/4p93j.

So - I don't have to buy at the lowest low and sell at the highest high - and I don't have to hold these stocks for long periods of time to make big profits.

I have on my watchlist approximately 20 stocks that I watch closely - I don't screen them every day but I do check their prices to see the general direction each stock is going. When I spot an upward trend in a stock, I go through my TA screens. If the stock "appears" to be going up - I wait. When an uptrend is definitely established, I buy. (I use www.buyandhold.com - which offers three window trades per day, Monday - Friday - unlimited buys and sells are free, less the monthly fee of $14.95). Limit orders are not allowed but I don't stress too much about getting the "best" price. I have noticed though that if a stock has risen two days in a row it will usually decline on the third day as traders take profits - so that's when I try to buy.

The stocks that I have an open position on I watch daily - I check the news and also run them through at least a few screens until I'm satisfied that they're still moving up. When I notice that the stock is losing momentum (and sometimes before if I have a profit - a bird in the hand is worth two in the bush) I sell. I don't hold on for the highest high - I remind myself not to get greedy - I only "need" a 3% gain per trade to make a decent profit through compounding.

Will Rogers said "You buy a stock. When it goes up, you sell it. If it doesn't go up, you don't buy it." That statement seemed like wishful thinking to me, but now I realize that I need to buy stocks that are already going up - and sell them while they're still going up - don't wait for a sudden plunge ;-)

After I sell, the stock goes back on my watchlist and I wait for another round ;-) By trading the same stocks over and over I become familiar with the "feel" of the stocks. This saves time & effort in constantly researching new stocks.

BTW - I sold my favorite stock MTEX on Friday - paid $18.48 (not the lowest low) - sold for $21.41 (not the absolute top) - for a gain of 15%. I don't need a ten-bagger - or even a one-bagger to make very good profits. I just have to keep making lots of small gains and reinvest the proceeds. I'm growing wealth the same way I used to go broke - a little here, a little there - it all adds up.

Okay ... what do you think? Please post your critiques - I love to learn!

‹(ô¿ô)›

Vyckie
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