Hi. How are you doing today? My name is Thomas Hallman. TommyJoe to my freinds of just plain TJ. I run 30% RETURNS. It's one of my loves. To research stocks and play with numbers is what I have done to relax for decades! One of the things I've tinkered around with are OSCILATORS in the market. I didn't have much luck looking at these things for a lot of years. They were mostly just moving averages and nothing else. Then I discovered STOCHASTICS in the early or early mid 80's. This blew me away. Not being satisfied with what turned out to be my HOLY GRAIL, I kept looking about. MACD, WILLIAMS RSI, BOLLINGER BANDS etc. All were good in their own rights but just not my cup of tea, as it were. I kept going back to STOCHASTICS. Why this is? I can't say. I just liked the elegance of it I suppose. MACD held somewhat (though less) the same type of elegance I was looking for in a BASING tool as well.
What is STOCHASTICS and MACD? And how do they differ? OK. STOCHASTICS is a pair of moving averages that compare a closing price to its high in a set period past. The percentage is arrived at by dividing the close by the high. This is the STOCHASTIC PERCENTILE. You then add this to the previous moving average (5 day,30day whatever you choose) and subtracting the first in your previous (day week etc.). Divide this total by the days you are using to get your moving avereage. It is generally thought that if you have a STOCHASIC of above 75 or 80% the stock was over bought. If you have a STOCHASTIC of under 25 or 20% the stock was over sold. THIS IS VERY IMPORTANT SO I WILL RETURN TO THIS PART LATER.
Another part of STOCHASTICS is charting. TECHNICAL ANALYSTS who are CHARTISTS are almost mystical in their reading of a chart. (like a clairevoyant with tea leaves I suppose) Now I am not knocking what these people do. Some are very good at it. But it's been my experience, you place 5 chartists in seperate rooms all with the same chart, they will see 3 to 5 different scenarios from these charts. Their charting has spilled over into STOCHASTICS. We have many followers of STOCHASTICS who look for divergences and convergences. Now these are very reliable, but finding them is very very hard as they are very very rare. I have tried my hand at being a chartist and just don't seem to have the patience for it. But I am still a lover of charts as they visualize for me what the numbers hide from me. (hmm sounds like a CHARTIST doesn't it) But I look for one thing only. (I will discuss that later)
Now what is the likeness or differnence between STOCHASTICS and MACD? Generally they are opposites. MACD looks at the close compared to its previous low. What you end up with is a similar chart just inverted for the most part. So the opposites are true on the percantiles . Above 75 or 80% a stock is over sold and below 25 or 20% it's over bought. I like BOTH STOCHASTIC & MACD tracking methods but when I was investigating these I had to make a choice as I didn't have a computer with a spreadsheet program or a charting program. I had graph paper, columar pads, pencils and a calculator. There was too much work to diversify my endevors into both. I chose STOCHASTICS.
All ocsilators will give you false buy signals, signifying false (even short term) bottoms. Mine still does to a degree. (about 15% of its buy signals are false.) So I played around with the time period looked at. I noticed that the longer the time period the less the buy signals ocurred. At the same time the percentage of false buy signals dropped also. Not just less signals with less false signal but less signal with greater frequency being correct! Now you have to have a LARGE BASE OF STOCKS to pick from. (We at 30% RETURNS utilize almost 300 sectors containing well over 2,500 stocks within them) We use a 64 day period with a 5 day moving average on the sectors to find a basing period. We then use the same method to see what stocks in that sector are basing. We then change over to a 64 day period with a 1 day moving average to find the individual buy signals on the stocks. (Remember the very important part I said I would return to later? well guess what? We just did!)
Now that you found your stock to buy how do find an exit strategy? First determine your selling price (whatever percentage you feel is realistic for that particular stock or sector) BEFORE you place your buy order. Place your buy order at the market. (ONLINE BROKERS ARE LESS EXPENSIVE IF YOU ARE MAKING THE DESICIONS NOT THEM) As soon as you have confirmation of the purchase being made, IMMEDIATELY place a limit sell order at your predetermined sell price. Have a time period you are willing to wait for the stock to reach its target price.. (a month a quarter a year etc) AND STICK TO YOUR GUNS! If it doesn't pan out by the second from last day of your time span DUMP IT! Cancel your limit order and place a market sell order for the opening on the next business day! There is your exit strategy. DON'T fall in love with a stock. There are a lot more waiting to be bought (mostly winners if you are realistic in your goals and intelligent on you buying strategy)
Our exit strategy as far as the time span is 94 calendar days. If we are not out of a position by then we will be at the next opening. How much does our little system make? Research has shown us the average hold overall is less than 50 calendar(as apposed to those"business") days The average percentage gain (gross before expenses) is just over 10% NOW THATS AN ANNUALIZED RETURN of 73%! (using a statistical average and we all know what that means. NADA!) The average losing purchase had a 96 day average time span (all will be at least 95 days with us.) and an average loss of just over 18% the highest loss however was over 49%. The average gain was held just over 32 days and the average return was well over 12%. Gains outperformed losses by over a 5.8 to 1 ratio. So for every 34 trades we would have made 290% of a single trade and lost 91.5% of a single trade. This averages out to over 198% of a single trade. If each trade is 6% of your investment (of this type investment) portfolio that is over 11.9% overall return in just 34 trades. If you can stay 70% invested (we try to stay as close to 100% invested as possible) you end up with about 89 trades per year 75 of them making money with 13 losing money. 75 times 12% (higher in research) equals 900%.(cumulative) 13 times 18.4% (lower in research) equals 239.2%(cumulative) leaving an overall return of 660.8%(cumulative) times 6% (what we advocate investing in any one investment) gives you a portfolio average return of over 39.6%!! (actual researched returns were shown as being higher in HISTORICAL RESEARCH.) As I have mentioned we used averages and then went on the conservative side at that. After paying commisions to the broker (OUR MYTHICAL RESEARCH ONLINE "BECAUSE THEY SAVE US SO MUCH DINERO' IN COMMISIONS" BROKER) we still end up with a net return exceeding 36% NOW ISN'T IT ABOUT TIME YOU SEE RETURNS LIKE THIS? YOU KNOW HOW TO DO IT! ONE OF 2 WAYS WAS MENTIONED IN THESE PAGES. DO IT YOURSELF OR HAVE US DO THE WORK FOR YOU!
HAVE FUN & SUBCRIBE HERE AND I WILL DO THE WORK FOR YOU! TommyJoe Hallman |
