How to optimise my basic strategy?

Discussion in 'Technical Analysis' started by Sam Kennedy, Jan 21, 2012.

  1. I'm very new to stock investing, and I'm only paper trading at the minute (I'm 19 so don't have money to invest).

    I'm using a very basic strategy where I buy stocks which show a bullish MACD crossover, along with the %K line crossing above the %D line on the slow stochastics. I look to make sure the ADX is increasing as well to confirm the other 2 signals. I'm using 1-day candlestick charts so I can invest over a longer time period, which I prefer.

    This seems to have worked okay-ish for me, I've made a 1.59% profit over about 2-3 days, however the trends look like they will continue for another few days.

    My problem is I don't have an exit strategy, if I wait for the MACD or SSTO to cross over again, it will be too late and I will have lost a lot of my profits, a couple of my stocks show the MACD has levelled out, should I use that as an exit signal?

    How could I improve this strategy?

  2. "The Swing Trader's Bible" covers the MACD crossover strategy, including exit signal(s). The market has been up so much in January, it's safe to say any bullish strategy would have made money these last few weeks. Don't be fooled by recent performance.
  3. hkrahra


    It wont be too late if you use different settings of MACD,one of them should be set with less periods then other.So when the ''fast'' MACD`s EMA line 'pecks' the MACD line - you exit.But it doesnt mean you should re-enter or take short.
  4. ==========
    a]for educational purposes only. I like your trend analysis;
    for example, AAPL is uptrending;C, BAC is downtrending on 1 year candlecharts/200 day moving average.

    b] I like daily candlecharts also,& investor help, trader help.
    2001 Stock Traders Almanac notes NOV,DEC,JAN tend to be bullish-not a prediction.Frankly AAPL, while a great uptrend, is very extended, but could be very more uptrendy in FEB.

    c] I dont use slow stoch... much[an ultra small time trader may use it ], simply prefer other traders tools;
    like a 20 period ema[exponential moving average].SPY looks even more tired, with huge resistance perhaps in FEB. So while i dont try to ''predict'' uptrends or downtrends, clearly there is more risk for the longs even in SPY, so my exit moving average would be paid closer attention to, as FEB nears,FEB starts.:cool:

    Another problem with slow stoch;
    it maybe fine , as far as averages, but with a better than average downtrend like C, better than average uptrend like AAPL, its a distraction i dont need or want.:cool: Wisdom is profitable to direct.
  5. ===================

    And if & when one finds a good trending stock;
    especially for research which is important - before trading or investing.

    I would do tests [& have done plenty of tests] a MACD with EMA, on many stocks;
    compared to a slow stoch.........

    For example if a slow stoch gets one out of a trend way to early;
    an investor may prefer a macd with EMA,or ema/simple/ for preserving profits.

    Keeping paper records may show that;
    some traders use price & volume much more than slow stoch.But the advantage of keeping paper records even if they dont show slippage, comissions. One may prove he likes slow stoch...:cool: