Skip to main content
No. of Recommendations: 3

You are definetly on the right track. Just a couple of comments. On RSI, I just look at the trend for the past month or two. If the RSI was in the 20-30 range 30-45 days ago, then goes up to the 80 range but then drops back to the 60 range in the past week, I look at the general trand over the past month or so, not the last week. So a stock that may have had the RSI fall in the past week, but has a general uptrend over the past 1-2 months, will stillpass my visual test.

Regarding volume, I'm not that specific, I'm just looking for a general 40% or so rise. Most of the time (or at least vey often), the stock will actually "break out" with my system during the first hour or two after opening. If the average daily volume of a stock is 1,000,000 shares, but it trades 500,000 or 600,000 shares in the first 2 hours the market is open, I'll consider that enough to pass my test and go ahead and buy if all other factors are good. By the end of the day, the trading may slow down and only a total of 1.3 million shares might have traded. I won't then sell this stock, but I will keep the stop loss order in place, and watch it closely. I might tighten it a bit, but probably I'd just keep it the same, as the other tests (RSI, MACD, and 3% above EMA all mean the stock is headed upward).

One final note. Don't be unhappy when you get stopped out, whether it is for a gain or a loss. You should be happy, because a preset stop that is executred means the system is working, whether you lost 10-12% on the trade, or made 30%. On the stocks you made money on, you need to keep following them closely, because if they turn back upward and meet the tests again, buy them back.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.