Today I bought a couple of stocks and sold one. This is Alexco Resource Corp (AXU) which I bought for $7.87.
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This is Cardero Resource Corp (CDY) which I bought for $1.58.
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My sale was of Proshares Ultra Silver (AGQ) for $147.00. I bought this position on Friday and was pleased to take a 6.8% gain from it today. I will look for a lower re entry point, should the setup look favorable.
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My TSI Trading record has been updated.
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Hi John,
ReplyDeleteThank you for all the time and energy you're putting into this. Could you please help me understand your methodology better by answering the questions following?
1. What is the logic in entering a trade in AXU long with the TSI around zero and declining?
2. In the Overview of the TSI section of this website you discuss entering a trade when the MA of the TSI crosses the TSI but the images on the blog don't show the MA nor is it offered by freestockcharts.com. Can you explain?
3. Do you have stop and/or exit rules and if so can you discuss them?
Thanks again, Frank S.
Thank you Frank for asking some very astute questions.
ReplyDeleteBeing perpetually inquisitive, I try zillions of experiments with indicators and particularly the TSI, to see if I can make a new discovery that would be both useful and profitable.
Last week I was tearing apart the stock components of the GDX to see if I could detect new momentum information that would be useful in predicting the GDX price movement. For now it appears I was unable to make any new discoveries.
This week I've begun to think about the effect of the (7,4), (13,7) and (25,13) TSI settings simultaneously generating signals at cycle lows. The AXU trade, as you may have noticed, had these three TSI settings overlay ed one another on a 2 hour chart.
I am still along ways from understanding what I will eventually figure out, but the theory of mine goes like this: When the 3 settings all cluster together, that is a decisive turning point in price direction. And you will notice that the three TSI lines had in fact just previously been clustered and were now expanding northward when I bought AXU.
Did the trade work? Nope. At least not in the short run. Perhaps it will when the three lines cluster (as they are now headed) on the daily chart. I will hold the stock as it is a miner and see what happens when this condition transpires on the daily chart.
Using moving averages is one of the techniques one can successfully use with the TSI. I just don't use it as I am of the opinion that the trend line break technique yields the correct trade signal sooner.
An advantage of the moving average technique, however, is that it may be programmed into an automated system fairly easily...whereas teaching a computer to draw accurate trend lines would seem to be a bit more complicated.
Rules for selling. Ideally one would sell when the TSI has a trend line break or a negative divergence or a zero crossover or a moving average break. I am personally mindful of these techniques, but honestly I tend to sell before they come into play. I really like to take my money (gain) when they give it to me and leave nothing to chance that the market will take it back from me. I don't use stop orders, or anything of that sort, ever.
Thanks again for the excellent questions!
Thank you John for the very complete answer. May I ask you why you don't use stop orders?
ReplyDeleteFrank
Frank - that's a good question and perhaps my answer will surprise you.
ReplyDeleteI don't use stop orders because I believe we are in a secular bull market for precious metals. This means that when a mining position I own is under water, it will come back to become a profitable position if I am patient. And this indeed has been my experience over and over again.
I never 'bet the house' on any one trade. So when I get far behind on a single trade I can afford to just let it have time to come back to at least break even, and usually for a profit.
Now if I was trying to trade any thing other than precious metal mining stocks, that would be another thing. Nothing else is in a secular bull market. Nothing else is as 'guaranteed' to make money if one is patient.
In fact, this logic precisely explains why so many people have done so poorly with their trading and pension fund investments over the past 10 years. Namely, people have not figured out that stocks, in general, are in a secular bear market. They continue to buy and hold (as worked up to 2001) and think if they wait long enough, they will be rewarded. NOT.
So, did my answer surprise you as I thought it might?
Well, no, only because I didn't have any expectations. Personally I feel uncomfortable without some sort of stop, no matter how deep. I'm not afraid of one position going south, I'm more concerned about some sharp exogenous shock to the system (terrorist attack, assassination, etc.) But that's just me. Thanks for the food for thought. Frank
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