For the second or third year, the systems for American stocks are getting worse., return-to-mean (mean-reversing). Especially on large price drops. If before the price bounced quickly on such drops, now it falls even more. And sometimes, one unsuccessful trade negates all profits over a long period of time.
That's why, more and more begin to attract systems, trend tracking — buy on breakout with a stop shorter than potential profit. But if it is stupid to apply such systems for an arbitrary list of shares, then it doesn't work — equity in such cases fluctuates at zero or, at best, is equal to the broad market index. Need a special approach to stock selection.
I think we need to look for the activity of speculators — increased volumes with an increase in the share price. This means that there is an increased interest in the action of those who are in the know, even before the release of important news or the onset of any significant events of the company. But big speculators are often wrong too., therefore, it is still necessary to study the fundamental ratios of the company, especially the growth rate of earnings per share during, at least, several years. If there is a trend of profit growth every quarter or year, then we can assume that the trend will continue and this will also affect the trend of the stock price on the chart. I.e, the company must be healthy, without any financial problems.
Or you can look for companies with a very high current P / E, which the, according to forecasts, should bounce back in the next quarters. This means that the company has great potential., which will lead to a price trend on the chart.
Or find stocks, who recently had an IPO and are still in the accumulation stage and have not grown tenfold. Better, those that have been forming a base in a flat for a long time and have recently broken out of it.
Important entry point — I think, that the best confirmation that a rising stock is serious about entering a big trend is the new high of all time, or, at least, for a very long period of time. On the other hand, if a new high is made, then maybe there will be a small correction, where you can enter at a better price. Although, so you can miss the strong, recoilless trend.
But any healthy company during a bear market will also fall.. That's why, it is desirable to connect the broad market index to the system. If the index is in a downtrend, then buying individual stocks is risky.
Everyone knows that there is such a sign (many call it sentiment) on the stock market — когда индекс технологичных акций Nasdaq опережает консервативный индекс SP, then this means that investors are willing to take risks and, due to this, growth of markets possible. At the moment, after a long preponderance of the conservatives, for several days there has been an overweight of those willing to take risks. The picture shows the spread between QQQ (Nazdak100) и SPY (SP-500), which shows a reversal in Nazdak's favor.
Рассматривать я буду только недельные charts, because the strategy is long-term. By tests, average position retention approximately 30 weeks. There is a solid stop, which ranges from 10 to 20%. There is a take profit, which will set by eye, somewhere in the area 40-60%. There is a soft tracking stop — that is, the position is not closed immediately upon reaching the stop, and at the open of the next week, if the previous week closed below the level of the trailing stop, to avoid accidental jerking, and in order to check positions only once a week, before monday.
Can be simultaneously opened up to 10 positions.
So far, I have allocated a small amount of money for this case.. And immediately opened 5 positions:
These are their weekly charts.:
