Questions from readers always pique my interest. I enjoy thinking about the question and then developing the answer. Rarely, though, do I get a question from another financial writer, a writer who I am familiar with, a writer whose writing serves the trading community well. Today, I received a question from such a writer. His pen name is Tango and he writes for Market Technologies’ bi-monthly newsletter about VantagePoint, its highly accurate intermarket-analysis software.
Tango does an excellent job discussing his well thought-out strategy for trading forex. He does so by demonstrating through backtesting the success of his strategy. Carefully and specifically, Tango explains each step of the process and the results of the trade under discussion. I am not a forex trader, but I enjoy reading his articles because it is obvious he cares about helping others become better forex traders.
So, when, I received his question, it piqued my interest in that I immediately began wondering how to answer it in a way that he would appreciate. Then it hit me, something I know intuitively, but in a moment forgot – I have to write the way I write. Given that, here is the question and my answer.
- T.E. Always enjoy your articles. Thank you. A question – you mention trading EMR profitably “a lot” over the past year – I’m wondering if you could take an article or two and discuss how you do that? I think lots of people would find that educational and useful, if you’d be able to do so!
Cheers, Tango
I have one minor correction, Tango. I actually said, “In the last two months, I have flipped this one stock seven times.” Putting that aside, here’s is what I did (and do) …
First off, I use VantagePoint as my analytical software. The usefulness of that tool is not new to you, but others might not know how helpful it can be. It is useful indeed.
Trading a single stock repeatedly is part of my trading strategy. I like doing this because I like knowing a stock I am trading. I like knowing its pattern of movement. I like understanding its correlation with the larger market movement. Sometimes a single stock runs in tandem and sometimes it runs opposite of the current larger market movement. In the case of EMR, it runs in tandem with the larger market movement.
Aside from knowing a stock’s pattern of movement, I also learn its fundamentals, thus, when I get news alerts about the stock, I can anticipate the market’s reaction, positive or negative. Knowing the characteristics of the stock, such as average volume (10-day and 3-month), 52-week high and low, resistance and support levels, and its short ratio helps with anticipation as well.
VantagePoint software then helps me with near-term predicted movement, predicted high and low for the next day, and momentum. This data helps me define entry and exit points, which is crucial to my success, as I choose volatile stocks with decent to high volume and wide swings in price in a short time frame. I choose stocks with energetic price-action.
In the end, I play the price action. Classically, I try to get in on the lows and out on the highs, but I don’t try too hard. I set my buys near the expected low for the day and my sell near the expected high. If the price-action is particularly energetic, I can be more flexible about my profit target, but I always aim for a certain profit and when I hit it, I get out (preset sell price) . I do not get greedy, nor do I look back with regret. If it is in my plan, I am happy with the results. My goal is not to get rich; it is to make money consistently.
A stock such as EMR allows me to use this strategy, as did BAC this past summer, before the stock became a dead money stock. BTW, it appears BAC is setting up for this strategy again, as it just broke through its 52-week high. It is in my sights again.
This is not my only strategy for trading, but it is a solidly consistent one. When I find an EMR or a BAC, I trade them until I can trade them no more, and that is usually when they settle in near their 52-week highs, or they begin a downward trend that breaks their pattern. The market we are in now is perfect for this strategy, although the strategy can work well in bull markets. It is just more difficult to find stocks with really “jagged” patterns or, more technically, energetic price-action in a market trending up strongly.
Thanks Tango for reading my work and thanks for the question. I hope I answered it with enough depth, although we both know there is so much more to the “art” of trading successfully.
To close, here is a taste of my usual look at the global economic picture, which is another pointer toward a bullish future.
- Asian shares touched fresh 16-month highs on Friday following modest overnight gains in global equities as investors watched progress in U.S. budget talks with expectations for an eventual deal and awaited U.S. nonfarm payrolls data later in the day.
Trade in the day; Invest in your life …
