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DISCLAIMER
This newsletter, Stock Market Trading, is for educational purposes only. It is the personal opinion of the author and is not intended to be financial advice. The ideas and strategies should never be used without first assessing your personal financial situation and without consulting a financial professional. The opinions expressed are solely those of the author. They may be correct or they may be wrong. No guarantees or warranties of results are implied or given. Trading stocks is a high risk enterprise. You could have substantial losses. The payment of a subscription fee for this newsletter is not intended to be, nor should be construed by you to be for investment management services. Trading stocks is high risk and may result in losses. You should do your own analysis and consult your own personal investment advisor.
We publish our market newsletter every weekend and evaluate the position of the major indexes. The Dow Industrials, the S&P 500, the S&P 500 equal weight, the NASDAQ, the S&P mid-cap and the S&P small-cap. With these evaluations you can decide whether to take a position in the ETF for the various index or to pass, stay in cash.
I also do weekly evaluations of the 11 S&P market sector. All of my evaluations are rated up, down, or neutral. The market sectors have ETF's that are available to trade.
I have developed my trading system for my own use. It is not complex and should be easy to understand and follow. Do not confuse trading stocks with investing in stocks. Trading is a very short term, weekly, business. Investing is long-term over a number of years.
On the page below I give a better description of my trading system. You can look at my suggestions for your own education or you can subscribe to my newsletter which will be delivered to you by email every week. The cost of a subscription is $100 for three months or $350 for a year.
Please read the description of my trading system below. By trend following it is intended to reduce risk while profiting from market direction. I also suggest that you use a money management system. This is also described below.
There are copies of back issues of the newsletter on this website. Just click on the newsletter button at the top of this page.
Victor Weintraub
There are hundreds of stock market indicators that have been developed by hundreds of people over the last hundred years or more. None of these stock market indicators have consistently been accurate in predicting the direction of the stock market. There are no accurate predictive market indicators. Having said that, how do you trade in stocks if you don't know what is going to happen. The best answer is to use a trend following system. That is a system that says in effect the future will reflect the past until it changes. When you look at a stock chart, if it slopes up to the right-hand corner it is an up market. If it slopes down to the lower right-hand corner it is a down market. If there are successive higher highs and higher lows it is an up market. If there are successive lower highs and lower lows that is a down market. That is easy to say when you look at a chart but it is history. There have been various other methods to determine the direction of the market. Many analysts draw trend lines. They all have their own method. They often combine this with areas of consolidations and chart patterns. The whole thing becomes very confusing. In the end we need a method that tells us the direction of the market now and when it is starting to change direction. Simple and consistent.
The stock market can go up or down or sideways. It has a tendency to move in one direction and to continue in that direction until it changes. We do not care why it changes. We just want to determine that it has started to change. We can make a profit in an up market or in a down market. I personally stay away from sideways markets. I have personally found that using a set of exponential moving averages to be a good tool to track the direction of the market. I personally use a series of four exponential moving averages in my work. I use a 5 day, 10 day, 20 day, and 40 day moving average. I have found that when the five day moving average crosses the 10 day moving average it is a signal of pending directional change. However it is not prudent to jump on a signal until there is confirmation. Going back to the moving averages if after a five-day ten-day cross, it is followed by a cross of the 20 day moving by the 10 day average the probability of a change in direction has increased.
I also look at the MACD and the PMO as indicators of positive momentum. I also look at the RS I and the On Balance Volume for positive indications. When the moving averages and the momentum and volume indicators all indicate a directional change alignment I can be fairly confident of a market direction change. Of coarse nothing is perfect and there is always the possibility of a zigzag. Trading stocks is a high risk business.
It all boils down to attempting to increase probability. An established market direction will show the four moving averages running approximately parallel. I have described my basic trend following system. The whole object is to increase the probability of being correct in your assessment of market direction. When you get down to basics you always want to trade with the general direction of the market and not against it. It really is not that difficult to understand.
If you find this concept interesting you can subscribe to this newsletter for only $100 for three months. In addition to evaluating the direction of the S&P 500 and the NASDAQ I also evaluate the 11 market sectors on a weekly basis. Hopefully if you follow my evaluation of the market you should be able to make a profit most of the time. You can buy or sell by following the market news letter. You should have a money management system. I cover that on a page below. Then just relay, make some trades and go to the beach.
It is very important that you use a money management system. If you are going to trade our trend following system we suggest that you diversify. That is that you trade several issues at the same time and not just one. That has the effect of spreading risk so if one trade is wrong it will not create major difficulties.
We also suggest that you have a stop loss order in place at all times to prevent major drawdowns. The. position and amount of the stop loss is up to you. In general we suggest something in the 5% of market price range.
If you are confused and are unsure of what to do, the best suggestion is to do nothing. You never lose money if you go to cash and you can earn interest. It is our suggestion that you only make trades when things look very promising. Even so you can be wrong. Our objective is to minimize risk and to cut losses short. In effect let your profits run with a stop loss behind them and cut your losses short.
The object of our trading with the trend system is to reduce risk. Never take a trade before you have confirmation of the expected direction. If you are not confident in what you are doing then go to cash. Cash is your friend.