The Perfect Chart
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     ohkoolnutz
Member
Username: ohkoolnutz
Post Number: 205
Registered: 10-2005Rating: N/A
Votes: 0
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| | Sunday, June 11, 2006 - 04:35 pm: |  
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I ran across this chart last week. This may be one for the textbooks.
This was then:
This is now:
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ohk
Lies, Damn Lies and Technical Analysis
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brumby
Member
Username: brumby
Post Number: 5
Registered: 01-2003Rating: N/A
Votes: 0
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| | Tuesday, June 13, 2006 - 07:18 pm: |
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Kool,
The chart might be textbook but what are the the setups and triggers in your opinion to trade this chart? We interpret charts for setups or else it it is more fun watching soccer.
Cheers,
Brumby
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ohkoolnutz
Member
Username: ohkoolnutz
Post Number: 206
Registered: 10-2005Rating: N/A
Votes: 0
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| | Sunday, June 18, 2006 - 03:20 pm: |
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I thought about that a lot especially since my entry and exit tend to problematic. I have had plenty of losses in rising stocks because I entered at the wrong time, couldn't handle my mistake and then exited at the wrong time. I think one solution is to use smaller stakes and allow people with a habit to get entries wrong or become weak in their their conviction a larger drawdown.
I drew four scenarios on the first chart. They may not necessarily be the best setups. The problem would have been volume. I think on each entry attempt $2000 would have been a maximum to prevent a price rise. The draw down would have been quite big in percentage terms.
1. Buy Stop Limit 0.46 on August 18, 2005 with a resistence line at 0.45 broken. Sell Stop Loss 0.29 (below lowest MA)
2. Buy Stop Limit 1.11 on December 27, 2005 with a downtrend line broken and using the count back rule to arrive at 1.10 last high. Sell Stop Loss 0.99 (Break Point with falling white MA)
3. Buy Stop Limit 1.19 on February 13, 2006 with a downtrend line broken and using the count back rule to arrive at 1.18 last high. Sell Stop Loss 0.99 (Last Low with rising white MA)
4. Buy Stop Limit 1.41 on April 5, 2006 with a downtrend line broken and using the count back rule to arrive at 1.40 last high. Sell Stop Loss 0.99 (Last Low with rising white MA and long-term blue MA)
The draw downs are huge but since volume was small you were forced to small stakes anyhow which would not have exposed your overall portfolio. The limit orders would prevent a gap or runaway and in this case you would have gotten filled (which we know tends to not happen.)
You arrive at a pyramid of
$2000+$1000+$500+$250 = $3750 / 5850 shares @ $0.64
If all stop losses had been triggered and you had risked $2000 each time you would have risked $8000 and lost $1900 of it which is acceptable if you had a portfolio of $100000 and consider you played four times.
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ohk
Lies, Damn Lies and Technical Analysis
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