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Trade Trends with Bollonger Bands and Twiggs Money Flow

Momentum Trading

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ASX alex_lyall14-Jun-10  06:39 pm
         

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jaded
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Friday, March 19, 2010 - 08:46 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thought a Thread on Colin's What's New recent article should be set up.
Reading the Bond Uni Professors introduction I suspect that Volume Spikes will be part of the Mechanical System.
I suggest that when one uses the IC Search Engine to identify Volume Spikes that you 'research' the News Items/Announcements around the date of the spikes to ascertain the Genuineness of the Volume.
I mean was it Trading or just Transfer perhaps Internally in an Institution.
I think that Transfers will be characterised by not much Price Range on the day and you have to determine for yourself the significance or otherwise of Transfer vs Trading.

That is that Discrimination may HAVE to be applied to a purely mechanical search.

Example


First Spike was an attempt to 'get out' of the Opes Collapse[ANZ grabbing one's shares as a Guarantee].It[this transfer attempt] failed and this particular Volume was Cancelled in Reality but Not on the Data.

Second Spike was a Transfer,I suspect Internally and has very limited use for Volume Analysis.

It's Volume Analysis that is quite affected by these 'false' Spikes.I average daily volume over a period that does NOT include such Spikes so as not to have average daily volume skewed by such days.So even if I prefer a 6 week/30day average[trading days]a spike event of this nature will have me shorten my average period to after it.

I'm trying to ascertain a normal/average volume to 'ponder' events with significant over or under it volume/price move days.
So I don't 'need' Dud Days Spikes 'confusing' me.

Happy Trading.On d'MOVE!!


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prater64
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Friday, March 19, 2010 - 09:27 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Jaded,

With respect to volume analysis, how does it differ or is it the same as Volume Spread Analysis (VSA) used in Master the Markets (book/ebook) from Tradeguider systems?







"Opinions: Opinions are like backsides, everyone has one. You just like the look of some more than others."

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jaded
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Friday, March 19, 2010 - 10:13 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



just can't answer,prater64.Know nothing whatsoever about what you are talking about.Care to elaborate?give some 'gist'/synopsis of this theory?

Volume Analysis,to me,is trying to determine which way the money is flowing.Buy or Sell,on some base of probability.

IE yes,every Buy has sold so there is an assumption that it is a balanced equation[Buy=Sell] and so Volume is dismissable and irrelevant.[Such 'theory' has been laboured here on IC ad nauseum]
However this 'twaddle' encourages No Discussion on Volume and it's significance/indicative value.

I think Volume is a very valid area of 'investigation' and is highly useful in share picking.What do you reckon,prater?
What do you know about Volume Analysis and do you think it has any validity as an Indicator etc ?


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prater64
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Saturday, March 20, 2010 - 02:46 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Jaded,

Myself, I'm just starting out as an 'L-plate' trader. I have been attempting to get my hands on various 'theories' and reading up on indicators and trading plans/techniques. The book I referred to is called 'Master the Markets' as I mentioned above and the premise from what I have read so far is based very much on the use of volume as a major indicator.

They make use of price, volume and later trendlines together. So far, most of it I have seen mentioned on other parts of the forums eg TAZ setups where price is falling on a low volume as one lead in indicator for an expected rise in price. On the opposite side to that is price increases on low volume being a sign that the upward spike is weak.

Throughout the chapters it talks about 'Trading Syndicates' or the 'Real Money' and how they determine the trends of the markets. eg;

A downward trend will already be in progress and a down-day (or bar) appears, which closes in the middle (or on the high), accompanied by very high volume. This signifies support by the professional traders.

The relationship of volume and price is then applied to trendlines as well as support and resistance lines. The more I flick through the contents and skim sections, as I type this up, the more it appears to be rehashing a lot of previous concepts after that.


"Opinions: Opinions are like backsides, everyone has one. You just like the look of some more than others."

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prater64
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Sunday, March 21, 2010 - 09:15 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Jaded,

In case you wondered I found this old post on the forums which refers to the book I was speaking about.

https://forum.incrediblecharts.com/messages/106/1256986.html


"Opinions: Opinions are like backsides, everyone has one. You just like the look of some more than others."

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jaded
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Wednesday, March 24, 2010 - 07:22 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



prater-didn't download the book mentioned in your above post.
One thing about 'books' is they take a long time to write and publish etc.
In the case of Volume Analysis the 'idea' that Smart Money buys Big Parcels,raising volume as an 'indicator' for analysis has been superceded by what's called Algorithmic Trading.[called bot trading on some forums,algae trading here]

I'm not going into it here with you.I just wanted to illustrate that the Market is Dynamic.Theories,Techniques that used to work,get adapted or countered even used by Smart Money to 'trick' the unwary or 'new'.

Should be another instalment of the Bond Uni Momentum Trading Series coming out this week in Colin's What's New letter.Let's see what's said this week.

Getting more convinced that it's going to be 'Short During Downturn/down direction of the market' stuff though.


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azworkinit
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Wednesday, March 24, 2010 - 11:21 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Jaded, I didn't realise I was referring to algae trading with the wrong moniker in the other thread. That!must be why I had no response. When Breaker1 says SLX may bounce off 5.55 as resistence, it would obviously have to be with volume?, not in the context of the consistent dribble of trades currently being subjected on SLX?.Rgds Az.


"Success is a lousy teacher.It seduces people into thinking they cannot lose."BILL GATES.

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jaded
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Wednesday, March 24, 2010 - 11:50 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



az-Instead of jumping all over other threads 'promoting' Silex.Open a Thread on it,probably in your case,in Long Term and make your points,info requests there.
I don't LIKE it.I'd never Hold it.Further I think an involvement with GE is a Negative.

Also I must have written 10,000 words on Algorithmic Trading and I'm real jaded about trying to explain it to every blow in chucking a Moral Panic about it.

SEE IFE thread at the BarBque for prime example.

As with your Silex,AZ The Algae is virtually the Only Trade because No One Normal wants to put in a Bid or Ask for any significant quantity at current prices.Hence Little Volume and a drift in price usually downwards.

Az some sellers HAVE to Sell while most buyers are 'ambivalent'/could I get it Lower?Do I really want it,anyway?
Sellers outnumber Buyers?Price drops.

anyway,got some things to do.
cheerio.


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azworkinit
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Thnx for the reply JADED, I was no more trying to "promote" SLX on the other thread than say, all the chitchat about GRR. I was only posting a STOCK that may gain 20%, you requested others do that.The only way to learn anything in this world is observe and ask questions. When participating in a forum such as this you open yourself up to such questions, be they perceived to be stupid, irrelevant or perhaps naive. I respect that you replied to my posting, and the reason it was in the momentum thread was because a couple of the few posts there involved volume and algae, both of which I was seeking information related to a specific share. The last thing I wan't to do is piss you off, as I think you have great patience with most people that are uninformed, so there we are.I won't pump SLX ever again. Rgds Az.}


"Success is a lousy teacher.It seduces people into thinking they cannot lose."BILL GATES.

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jaded
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Wednesday, March 24, 2010 - 01:09 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



You can pump/whatever SLX anytime you like,Az.It just should have it's own thread and especially Daily Bread is not the right place here.

Get it's own tread.Set Out perhaps where your Break Even is and What Target Price you're going for etc etc and maybe there be other forum members or never post just readers,who'll be motivated to discuss the share with you.

I just have the 'feeling' that you're deep under water [in loss] with this one and maybe,along with GBG,you're not all that 'otherwise involved' in the Market?
Have you still got those crayfish leases?You've 'advanced' in your mining carreer,right?

It's not surprising that the ShareMarket is a mere 'hobby' for you and you are 'ignorant' of finer points.

I'm happy to contribute to widening your knowledge,az but I can't be expected to answer questions if I'm not "getting" your,particular angle and situation,your point of view correct or amateur it may be.

i can only handle one newbie at a time.I prefer 'my' newbies around my own age or 'attitude'[rough diamonds/non blue chips/interested in my type of music.just not Sydney or Melbourne Gunner Be SPIVS!!]

Anyhow,az are you doing anything with the IC scanner programme,to come up with 'Go's'/Buys maybe?Are you interested in trying to develop your own trading system?
Have you got,say $20grand to 'spare' to use?Less?More than that?

you know,that's my angle/game.Taking $20 grand and Trading it into say $50k in a Year/18 months.Seeing as you az may be weeks away from a computer screen that 'return' may be ambitious but I reckon it can be 'easier' to turn 10 into 20 than it is for 50 into a 100 but i just 'feel' that.haven't backtested it.

So az,I think Silex is a Dog and GBG has alternatives in the iron ore sector.what do you reckon[in no less than 100 words!!]
cheers.


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breaker_1
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Jeez Jaded,

have you sacked me?



When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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azworkinit
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Thnx for the clarification Jaded. At the moment I have consolidated into THX, THXOA , RMS, SLX. At one time I was in about 10 different stocks though prefer some to others. I am probably overexposed in SLX, though could take the loss and still be well in front overall. I got into RMS @ .41 and got out this morning as it has stagnated and I have probably gotten impatient. I haven't been in GBG since I made good back when I first started out the mine. Overall I have access to about 75k, with 60k currently in.I have Internet in my room at the mine and also have the phone watchlist at smoko and lunch.The options were bought 30000 @.06.I liked UMC though BHP buggered that.I also like FRS.The UMC connection was obviously tied to THX so at least THX got some cash in the bank.Rgds Az.


"Success is a lousy teacher.It seduces people into thinking they cannot lose."BILL GATES.

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jaded
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You've got $60000 [as I have] in the Market and you don't have access to Market Depth,Course of Sales thru NAB?you just 'ask' on the phone some 'student'!!?!!!
That's why you couldn't figure out the Auction Process???
because you don't have access even though you're 50 grand$$$ plus Exposed!!?!
az you gotta work on it a bit more.at least hook up to an Online Broker that provides these 'indicators' on a refresh basis [not the high cost Live Feed][IMHO]

Open a thread on THX then.What's the Option cost that one pays in 2013?THX is Nickel,isn't it?How's nickel going?Pray you're not in it for the Uranium or bleeding Platinum!!

Why FRS?Open a thread and chart and tell us all about it,you Iron Ore Blaster,you.Bought some GRR at top price today.GRRRR.

breaker-yes you are sacked if you're some refugee from down south hiding out in in god's own country 'exploiting' us yokels!!

Where's the Momentum gone in this Thread?What's prater thinking of his email box?

It's ALL your fault,azworkinit.Repent!! Post some seperate threads.


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azworkinit
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Thank god!.There's the humour I was looking for. Someone just picked THX in The tippin comp though I can't find where that was now.Rgds Az.


"Success is a lousy teacher.It seduces people into thinking they cannot lose."BILL GATES.

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baysider
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Jaded

On the subject of momentum, around December 09 I started to use the SPA3 trading system as espoused by Gary Stone, you may have heard of him - he's quite often on the Sky business your money your call show.
I won't go into the system in detail now, suffice to say that it's based around a momentum indicator they've developed - you know the sort where I'd have to kill you to divulge the secret formula!! Clearly in a market that's been going sideways for 7 months a momentum indicator has some limitations. You do find yourself getting in on some trades at too high a price and when the market turns down again your stopped out. The signals do turn up some interesting trades mind you and I'm enjoying the process. If I'm honest I have to say I'm currently down 4K though this is not unexpected as I say in a sideways market, it clearly will work best in a market either going up or down as there is a signal to short the index as well to protect your open trades and profit from the short in it's own right if there's a long downturn as in 08.

Regarding the iron ore stocks the SPA 3 system has 'open' long trades on:
AGO, BCI, BRM, BTV, FRS, FMG, GRR, GWR IFE (though says this is a 'NO TRADE' - may be lack of data), IOH, IRD, SPH so you're spoilt for choice!!!

The most recent signals that I can recall that are still relevant ie the price has moved miles away from the buy signal are GRR, FRS, BCI, FMG - GRR being the most recent.

I have GRR and today bought FRS at .965 on the pullback.

Hope that is useful. If you're interested I can tell you more about SPA3 some other time.


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jaded
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you know,baysider.you are one and amongst the Only 'decent' newbies on this Site.No wonder you 'tolerate' me!!

So you've bought into some 'wonder' Mechanical System BUT you've noticed it generates too many 'maybeees'[as in Iron Ore]
This is the problem with ALL Scanning Programmes.I say it's also the Problem with all pure TA based backtested systems.

They generate too many 'Maybe Proof' of theory and one has to Discriminate/Pick say 3 from 10 and this 'picking' separates the sheep from the goats/winners from losers.
But mostly Negates Backtesting a sequence of indicators coming into 'kismet' as Irrelevant because from a list,one MUST choose just 2/3/5 for economic reasons.[ie you can't buy the lot in Reality]

Blind Freddy/TAZ/ all programmed pattern recognition Formulas have this problem.

Multi Possibilities but Limited Capital to Follow them leading to you have to CHOOSE.

So 'yours' baysider has this 'exotic' rider of Shorting the Index to be 'safe'.
Well,shorting is Leverage so it's NIX for moi.

Now,baysider there has to be a Better Way.It'll either be a Third or Fourth 'Variation'.[Want to get High Faluing?it'll be dialectic or ouspensky/gurdijeff related] However,around here there's this ';culture' amongst 'd'Smarties' of secret,developed 'theory' that is unspoken/kept unknown.
Why?
well the 'cabal' has to "Feed their Families".If every dill bought what and especially WHEN I did?It'd be catastrophic to my family,even just ME,I,d'Great One etc etc blah blah.
baysider,I figure resillient is currently on this TRIP!!

Oh if everyone knew what I do/think?

baysider,be very wary of Pay a lot so you 'alone' get d'Word!! systems.

The ONLY books worth buying that just MIGHT have 'insider' info/or rather High End TA Theory cost $100's not $50 buck$$.The latter are just populist 'pap'.
Unfortunately the former[$100's worth] can be 'dated' and the Goers already absorbed and countered them in Theory and practice.

See why I'm waiting with 'baited' breathe on Colin's next Bond Uni's "Professor's' instalment on Momentum Trading?

grist to me mill.some academic looking for consultancy fees outta of some mob called Porter Capital.Of course they can play Momentum with a Mechanical "Plan".They're using someone else's Money.

ahh baysider,I come from Brisbane and LIVED it's 1970's/80's.Have a Fine Appreciation of d'JOKE as per d'Fortitude Valley of those days.
Some Gold coast "method' is Fascinating to moi!!

anyway,the IC scanner can drag up scores of Momentum Go's.
How will you pick a half dozen from a Score?Is the Dilema.


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colin_twiggs
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Please post any questions for Bruce Vanstone here. Bruce is the author of the Momentum Trading series of articles.


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jaded
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Greetings Bruce,

Momentum is defined as Rate Of Change in Share Price.

What Rate of Change in Time Period qualifies under your System as a Buy?

and have you done any work in Momentum of shares outside the ASX200 even All Ords or is Porter Capital[and yourself] not interested in such 'Small Cap' Shares?

regards.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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jaded
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Addendum-
Alan Hull is 'interested' in shares that have Momentum[Rate of Price Change] of 120%/annum.
This is the basis of his Searches.
So my interest,Bruce is what Momentum is your Search criteria and what 'grade' of shares you are backtesting/searching in?


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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brucev
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Hi Jaded,
both questions already answered in article 2.
Momentum length = 12 months
Stock Universe = ASX200
Regards,
Bruce


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jaded
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momentum length 12 months BUT at what rate?
any ASX 200 that 'seems' to have Upside/Momentum?
In Article 3 there is a statement along the lines that "one' can have less money/capital when Momentum Trading.
Is that less than an Index Fund? Only?

Does any of your "Work",Bruce have much relevance to the Individual,DIY Investor who doesn't want to invest in a Institution but handle their own affairs?

but as you 'found' the current Market Conditions don't 'encourage' Momentum Trading[Sideways/Down in ASX Index] so what rate of change/momentum 'triggers' your researched 'Findings' to Activate ie Have a Go?

or should we just rely on 'experts' to carry us?
be a Porter,so to speak?

Happy Trading,Bruce.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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brucev
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Hi Jaded,

Q>>"momentum length 12 months BUT at what rate?"
- sorry, I don't understand the question

Q>>"any ASX 200 that 'seems' to have Upside/Momentum?"
- sorry, I don't understand this question either?

With the rest of the questions, I think you are asking is it viable to use momentum as an individual, or only within a fund environment. Assuming this is your question, then it can be used either way.

However, there are serious benefits to most people investing using a fund approach. Many individuals assume they can replicate the work of a fund, but in reality, they fail as they do not act on their information correctly. Rather they second guess things, and end up sabotaging themselves. At that point, they usually begin their search for a new approach, often discarding something successful.

Funds also have other benefits - for example, their cost of trades is much lower, and they continuously seek to improve their processes.

Regards,
Bruce


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jaded
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well Bruce I'll try to clarify so you can understand the Questions.

Momentum= The Rate of Change in a share price.
So the percent Rate of Change that you have "researched' as Optimum is of interest.
"Optimum" is defined by-
When it [the share price] is 'Momentuming At' then you,Bruce,have researched/studied what rate of Annual Momentum signals a Buy?

Do ya follow,Bruce?
I read[Was it Article one?]that the Hold of a Momentum Share was average 6 weeks by Porter Capital.
So I'm interested in your Academic Research on Momentum what Rate you have Identified to Buy and when it drops initiates a Sell?

Bruce,frankly,are you trying to sell a Book on your Findings to the General Public?
or are you trying to Sell a concept[Momentum Trading] to Institutions who are currently Index Based?

There's been a lot of "Work" done already on the Individuals' Psycho Approach to the Share Market and Trading.
I'm sure there's some clients who just can't be bothered here at Incredible Charts that you may pick up.

Bruce,I'm from Queensland,Born'n'Bred Brisbane.I been down d'Valley and Bruce...well,,,it all seems you're pulling 'd'Joke'.

What is YOUR definition of when a share is under Momentum 'sufficient' to Buy?

from that one calculates when a share is 'failing' to Momentum so one Sells.

Have you any 'Improvements' on Alan Hull's 120%/Annum?

or isn't Hull credible enough compared to a Professor at Pay Full Fees and ya get in like Bond Uni of the Gold Coast?

I'm sorry if I'm 'offensive',Bruce but as your articles 'exposed',Momentum Trading is not New.It's theory has whiskers on it.I'm just interested if you,Bruce have researched up anything New or at least definitive or just brought Momentum to the attention of "Institutions"?

Once that's established I'll be really prepared to 'check out' your know how of Institutions like what Profit Rate motivates them to Sell?

Do you follow,Bruce?
What "They" who are investing Other Peoples Money seek[other than Commissions]will be of interest/benefit to "We" who are 'traumatised' by what BigMoney does to our share picks?

regards.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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ingot54
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Wish I'd thought of those questions, Jaded - excellent investigative thought.

Would be keen to get some answers from Bruce on this myself, given that "Institutions" (ie all other-than-small holders) can actually create/stall/reverse momentum simply by the sheer size of their portfolios, when "getting-in" or "getting-out" of the market.

All the small investor (ie the likes of IC adherents) can ever hope to achieve is to do their TAFA analysis, and hope for the best as they cling to the coat-tails of such momentum-creating moves, as the movers-and-shakers of the market flex their muscles.

But by their very size and constraints to achieve positive VWAP, it can take many weeks to get fully in or fully out of the market, thus creating the kind of momentum I think we are supposed to be talking about, if we are favouring Bruce's ideas.

But of course such "momentum" can only be established once the influence of the likes of Greece and Spain are no longer reflected in the markets, and happy days are here again - be they bullish or bearish.

In the current climate, I seriously think momentum would be any move that lasts longer than 4 days, but less than 9 days.

Best wishes

Ivan


Keep Smiling - Don't look back

Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison

Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead


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brucev
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Hi,

firstly, I do not understand the references to putting d' in front of some words, or the special meanings you seem to attach to particular words that you put in quotes. From the language around many of your comments, I guess it is supposed to be provocative, but, quite frankly, I find it only confusing.

Most of your questions I do not know the answer to.

I certainly don't know if there is some optimum value of momentum or rate that should be used to buy and sell.

As I explained in the 2nd article, to do the simulations, I sorted the ASX200 list by momentum, and 'bought' the top 20. These were then rebalanced going forward and when a stock moved out of the top 20, it was replaced with whichever stock displaced it. In this manner, there are always 20 stocks, as there is always a "top 20" able to be formed from any list of 20 or more stocks.

For this reason, your first 5 or 6 questions relating to the momentum levels, momentum rates and price thresholds etc don't have any meaning. I do not know what the rate/threshold etc would be at any particular point in time.

Further, your comments regarding my book are misplaced. My book has nothing to do with momentum. My book is the course notes from the university courses I teach about how to develop stockmarket trading systems.

This series of articles about momentum was primarily to ensure that people using this forum are aware of the credibility of momentum as an investment approach.

Finally, I don't know of Alan Hulls work. Your comments concerning his credibility just seem confusing to me.

I am happy to answer questions in this forum, but all of those you have asked so far have already been explained in the articles themselves. Perhaps a re-reading is in order?

Alternatively, if you have decided to discard momentum as a trading approach, then the articles should at least make you aware that the weight of scientific thinking does not support your decision.

kind regards,
Bruce


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espresso
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Hi Bruce,
Thanks for your article, I assume all traders would have an entry and an exit strategy; my question is If the market is converging, them momentum would have slowed down based on the daily average volume traded. Then at what point based on momentum trading do you exit the market, or do you exit the market based on price?
Regards
George


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brucev
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Hi George,

all the usual trading caveats certainly apply. For traders who use stop losses/profit targets, then these techniques are compatible with momentum.

If you feel the market doesn't exhibit strong momentum due to converging, then the safest place to be (in my opinion only!) would be cash.

Cheers,
Bruce


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jaded
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hi brucev,
i did read your articles but i was hoping that they didn't reflect the depth of your research.
I didn't realise it was only some How to be an Institutional employee 101.
I knew of only one person in my Senior 1970 class who went on to be a StockBroker.He didn't go to Uni to get his Qualification.He merely played for the Wallabies for a few years and so,I suppose,got Contacts and a Salesman's job.

So you've clearly set out above your Momentum System.Top 20 performers from the ASX 200 make the cut.

There'd be aspects of weighting [ie how much/percent] of Total Portfolio is allocated to each of the 20 chosen ones.
Do you weight by Rate or equally?
Though such questions may be considered off topic?

Anyhow,hope you get some posts from members you can understand.I understand your System perhaps too well.

Alan Hull has a Momentum System based on All Shares Listed,some 1500.It's for the 'Hands On' Investor/Trader to use their own money on.Perhaps that's not within the ambit of your interest,Professor?

happy trading.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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scarrie
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Hi Bruce, I think what jaded is trying to ask relates to your statement...

"As I explained in the 2nd article, to do the simulations, I sorted the ASX200 list by momentum, and 'bought' the top 20. "

How did you measure momentum?

Dave


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brucev
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Hi,
momentum is the same as rate of change over some period. It is a measure of how much a price has changed.
For example, monthly momentum is the amount of change over 1 month. In technical analysis terms, this is normally called ROC().
Cheers,
Bruce


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brucev
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Extra: perhaps this also helps http://en.wikipedia.org/wiki/Momentum_investing

Cheers,
Bruce


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colin_twiggs
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Jaded,

Bruce agreed to answer questions relevant to Momentum Trading on the forum as a follow up to the articles that he was kind enough to contribute to our website. Need I remind you that this forum topic is about Momentum Trading and not about your rep in d'Valley. Please stay on topic, otherwise stay off the thread.

Bruce,

It may help to give an example of a simple momentum trading system. Either here or in a follow up article.

Regards,
Colin


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zorba
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G'day All
I find it amazing that someone presenting as a University lecturer/teacher is not aware of Alan Hull's work.
Just a comment on this subject - no 'stars' or disrespect intended.


As the Irishman said, 'Anyone who's not confused here doesn't really understand what's going on'.

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jaded
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Bruce,in your articles you stated that you had backtested your Momentum System and I got the impression that you'd either provided to or took from Porter Capital a System.

What I'm interested in is the TIME Period you use for establishing the Top 20 of the ASX 200 Momentum Wise.
Also what Time Period in the Trend of the ASX 200 that motivates you to make the List of Buys.

As you have stated,the ASX200 going sideways or down is not the optimal time to be in Momentum shares,better to be in cash.So there must be a Market Point in time when Momentum Upwards triggers a return to the Market.What is it,for you?

Are you willing to share with us this info?

Also I been thinking about your culling process of the Holds.That is dropping shares and adding to your Top 20.

There would be temporary factors affecting Momentum.Dividend Announcements or Payments for example.
One Share may have made it's Annual Report before another and thus for example Number 22 'jumps' over Number 20.

This would cause WhipSawing of your Top 20 Portfolio,wouldn't it?ie Selling one/Buying Another only to reverse the Trade perhaps.

Also have you done any work on the success or failure of shares in Long Time Momentum Up compared to Short Time?Which is more likely to fail,give high probability of Loss than Gain?

What I'm trying to find is what did your study of the Losers in your System reveal and is their any tweaking able to be done to minimise choosing Losing Momentum Shares being included in the Portfolio.[I realise Losses are Minimised by quick sale but I was just interested in any research on why/how/when Momentum of the Top20 of 200 turns]

Now I realise from reading your articles that you are mainly concerned with highlighting the Better Returns of a Momentum Fund vs an Index Fund.
To the High Wealth but DIY Investor,I suppose your work brings into question Diversification over All Sectors compared to concentrating in the Hot/Most Momentum happening ones.

but,Bruce mainly I'm interested in your TIME line for Momentum comparison[yeah the Rate is Annual]but especially to Start,Come Back into the Market with a significant number of Purchases.
Is it a week,month,quarter of rises that triggers your buy even list compiling or maybe just July 1st?
Always remembering that the ASX 200 Index has to be showing Upwards Momentum but again for what TIME?

Hope this is clear enough for you,Bruce.

cheers.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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brucev
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Hi Jaded,

Q>>"What I'm interested in is the TIME Period you use for establishing the Top 20 of the ASX 200 Momentum Wise.
Also what Time Period in the Trend of the ASX 200 that motivates you to make the List of Buys. "

A>> As stated already in article 2, it is 12 monthly rolling momentum, calculated on a monthly basis.

Q>>"As you have stated,the ASX200 going sideways or down is not the optimal time to be in Momentum shares,better to be in cash.So there must be a Market Point in time when Momentum Upwards triggers a return to the Market.What is it,for you? "

This is part of the "proprietary" characteristics of the Porter Fund.

>>"Now I realise from reading your articles that you are mainly concerned with highlighting the Better Returns of a Momentum Fund vs an Index Fund. "

A>> Correct!!! ...and further, the effect doesn't just relate to funds! The article was to make traders aware that momentum is a credible, viable approach to investment, and has been proven in virtually every world market. I extended this research and demonstrated its presence in the Australian market, confirming the work done by the brilliant academics who "discovered" the momentum effect many years ago - as I referenced in Article 1.

My contribution here is to ensure that traders on this forum are aware that momentum exists, that it is credible, and that it is present in the Australian market. What you do with that information is up to you.

As far as Porter Capital is concerned, they have built a product based on it, and solved some of the outstanding questions you have alluded to. I have had some contribution to that process, as I work as a consultant with them.

I hope that helps put my articles into perspective for you. They are information. How you use it is up to you.

kind regards,
Bruce


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jaded
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brucev wrote on Wednesday, June 02, 2010 - 09:04 am:

Q>>"As you have stated,the ASX200 going sideways or down is not the optimal time to be in Momentum shares,better to be in cash.So there must be a Market Point in time when Momentum Upwards triggers a return to the Market.What is it,for you? "

This is part of the "proprietary" characteristics of the Porter Fund.




brucev wrote on Wednesday, June 02, 2010 - 09:04 am:

My contribution here is to ensure that traders on this forum are aware that momentum exists, that it is credible, and that it is present in the Australian market




brucev wrote on Wednesday, June 02, 2010 - 09:04 am:

As far as Porter Capital is concerned, they have built a product based on it, and solved some of the outstanding questions you have alluded to. I have had some contribution to that process, as I work as a consultant with them.




Thanks Bruce but Momentum Trading has been discussed and used here for Years.
In the IC Programme there is a simple search to highligt/list/rank any and all shares that are showing Momentum for a week/month/quarter even yesterday.There are techniques for culling this list that are freely discussed here as well as incorporated into the Search Engine eg Liquidity etc.

It[the scan] can easily 'specialise' in the ASX 200 but one finds that the Greatest Rate of Momentum is often in shares outside these of Institutional interest.

Blue Chips are no 'safer' than Mid Caps and Below.It's just that one gets 'credibility' investing in Names.You can also get a line of credit/leverage/play derivatives in Blue Chips.Personally I think they are over analysed and that's why they do not show the superior Momentum of some of the "Browns"[as opposed to Blue]

Thank you though,Bruce for bringing Momentum up again.In these choppy times when one should not be fully invested,one should review one's Method and Plan and Momentum Trading is certainly a Top Method.

I was just pondering[while doing the washing up] about narrowing from Top 20 to say Top5[limited capital].
I thought that the Top5 would have the highest rate of Momentum and thus get the cream of return
BUT then I realised that I'd miss out on the Momentum in Number 20 getting to number 6 [say] and may just hold the top 5 peakers?

Do you follow,Bruce?
Can you say why it's 20 and not 50 for the Institution?Do you agree that 'limiting' to 20 misses up and comers spurts from say 45 to 21?

I'm rambling a bit,hey?
One could assume that an up'n'comer would show superior rate in your given time period to 'alert' for a swap ie in a time period that share which was 45th once would show up as Top20 in a subsequent time period
and this is a month for you,Bruce.

This certainly highlights one is NOT stock picking the Bottom,right Bruce? When a share hits Top 20 Momentum calculated on a month,it should be Up in Price significantly on last month,right?

So the Trader[or as I call them-Pilgrim to Mammon]would have to have their greed/regret at lost profits well under control to still Buy even though Profit is Foregone.

Very Important to get such concepts into the heads of the New Investor to the Share Market.

Anyhow,Bruce I won't 'confuse' this thread with my ramblings any longer.I'll give other members who are more respectful of Authority/Establishment Views a chance to chat and confirm your work.

Happy Trading.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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chart_rider
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Wednesday, June 02, 2010 - 12:41 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



bruce

Your website mentions the application of AI to the development of strategies.

With regards to the development of momentum trading strategies, do you include AI to the identification of momentum, or is the AI applied to the development of entry and exit points only. My interpretation is that the AI is applied to the price data to identify the entry / exit points only, applied to stocks that pass a simple momentum (ROC) filter?

CR


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brucev
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Hi chart_rider,

most of my academic work focuses on the use of AI techniques, particularly ways to enhance existing trading systems using AI. I generally use the AI approach for developing much shorter-term trading systems.

I haven't found a good way to combine AI well with momentum approaches yet... certainly it is on the list of "future work" I need to get to.

Have you used AI in trading before?

best regards,
Bruce


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chart_rider
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bruce

My only exposure to AI so far is some reading and thinking about it.

My work during the past few years has been more conventional development; backtesting systems based on price and indicators and carrying out corresponding statistical analysis.

In line with your comments regarding momentum, my findings and experience has been that half the success of a strategy is due to appropriate filtering of stocks and the XAO (ie only trade when the XAO is trending).

Working with AI involves a quantum leap in resources and so far I've been a little reluctant to take the plunge.

CR


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cjb
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Hi Bruce,

Thanks for the contribution. Tavis Morien posted http://www.travismorien.com/FAQ/shares/momentum.htm some interesting info regarding momentum investing. I am not sure if you have seen it but for others it might be a useful read.

A while back, I spent some time looking at applying AI (neural nets and wavelets of various types) to trading. My interest was in evaluating changes in chart direction or turn points. The results were ok but I later developed a different way of doing this which was not based around AI. End points on wavelets are hard to work with.

Looking at turning points is very much in line with momentum trading. For me , I have a slightly different way of looking at the underlying momentum (trend) then I look for a change of direction and based on that context it gives me a probability of what might happen next. I personally have never found ROC of much use for what I do. I like to use a reference point for each bar on a chart. I also find looking at different times frames is most useful. My trading style is strictly intraday but interestingly, the same techniques can be applied to different time frames with interesting results.







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espresso
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Hi Chris,
excellent article, thanks for putting it to our attention.
cheers

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