[isatrader]

Dear group,

I hope this has not been covered before. How do you actually buy shares? The book covers setting buy-stop orders on a good until cancelled basis to automatically buy shares on a breakout. However, the online service I use does not offer this (I'm in the UK). I'm not sure if this an often offered facility for mainstream services.

Even if it were offered I can see some issues - as you don't know exactly when and if a breakout will occur you will be wanting to set up multiple buy stops in place. However, multiple buy stops add some danger - you may end up with more commitments than you have been expecting.

Personally I'm watching stocks like a hawk and buying within a day or two of a breakout. However, it seems that a lot of stocks jump suddenly and I've found myself buying on a peak before a pullback. I'm sure in time that the majority of cases this issue will be moot in the long-term but it can be somewhat alarming to find myself buying a share only to make a loss at least for the short term.

I suppose one way around the buy-stop issue would be to set up a CFD account as they seem to offer more stop features. I presume that if you are careful with the stops then that does limit the risks - and I note that at least one provider limits liability to just the value of the account by closing the position so you can never owe them money. However, I a bit wary of the CFD route at present - not for widows & orphans etc. It also seems to me that CFD accounts are aimed at day traders - not what we are doing here. I suspect another strategy would be to keep a bit of cash in the standard share account - buy on the CFD and then if is a keeper simultaneously sell on the CFD and buy on the standard account - having the same effect as transferring the shares.

Any thoughts?

Pete

Hi Pete,

This has been discussed a few times, but it's a big site so I'm happy to go over it again for newer traders that haven't come across those discussions yet. Basically, this is one of only a few areas that has changed since the book was written back in 1988 as the market has evolved due to technology and so there is a much higher rate of false breakouts. So, the method has changed slightly and no longer suggests using buy-stop orders in the way described in the book for investors, and instead emphasises buying a strong "close" above the breakout level. I spoke to Weinstein earlier in the year about it, here's the Q&A on that topic:

Me
Q. The book had a whole section on buy-stop orders, which I presume has been dropped over the years due to false breakouts that you would get these days? As I read your Technically Speaking interview from 1997 in which you were talking about buying a strong close above the breakout level, and also note in the GTA reports I’ve come across that you always say something like “A breakout (on a closing basis) above that level would be the signal to do buying”. So I’m assuming that the buy-stop section from the book is now void, and that we should be looking to buy breakouts near the close of the day if they are above the breakout level and towards the high of the day?

Stan Weinstein
A. Because of the increasing amount of false breakouts, investors should only do buying when they see that the breakout isn’t false (and that it closes above the given level). However, a trader should do at least partial buying on an intraday basis when it breaks out above the given level (using a buy stop order), and then if at the end of the day it turns out to be false and it closes back below the level, then traders should immediately get out. But if not false and it hasn’t run too far, then later in the session, traders too can do additional buying.

So, as you can see from the reply it's different depending on whether your are a trader or an investor, as an investor should wait for strong close above above the target level they are watching before getting in. So in practice you can set an alert in your chart software (if it has that option) to notify you by email when the target level is breached and then be ready near the end of the trading day to buy if it's going to close the day strongly above the target level. So, you'd buy in the last 5 to 10 mins before the close of the day imo.

For a trader it's different as for example if you are in the UK then you can use a spread betting or CFD account, which both have the option to do a partial buy stop order order like he suggests in the answer above and then complete the purchase near the end of the day if it proves to not be a false breakout, or get out of the partial position if it closes back below the breakout level for a small loss.

Another way to avoid false breakouts is to make sure that you only trade A+ picks that meet the four main requirements of the method. i.e. price action breakout with a rising 30 week moving average, at least 2x the weekly average volume, relative performance above the zero line and above any near term resistance. As you'll find that you get a lot less false breakouts if you really focus on meeting all the key criteria of the method. So focus on the quality of your picks and don't settle for anything less.

I hope that helps.

[pcabc]

...
Any thoughts?

Pete

Hi Pete,

This has been discussed a few times, but it's a big site so I'm happy to go over it again for newer traders that haven't come across those discussions yet. Basically, this is one of only a few areas that has changed since the book was written back in 1988 as the market has evolved due to technology and so there is a much higher rate of false breakouts. So, the method has changed slightly and no longer suggests using buy-stop orders in the way described in the book for investors, and instead emphasises buying a strong "close" above the breakout level. I spoke to Weinstein earlier in the year about it, here's the Q&A on that topic:

Thank you, appreciated. I suspect the average person has far more information than was available to all but a few when the book was written - and the chore of plotting your own charts is all but eliminated.

Me
Q. The book had a whole section on buy-stop orders, which I presume has been dropped over the years due to false breakouts that you would get these days? As I read your Technically Speaking interview from 1997 in which you were talking about buying a strong close above the breakout level, and also note in the GTA reports I’ve come across that you always say something like “A breakout (on a closing basis) above that level would be the signal to do buying”. So I’m assuming that the buy-stop section from the book is now void, and that we should be looking to buy breakouts near the close of the day if they are above the breakout level and towards the high of the day?

Stan Weinstein
A. Because of the increasing amount of false breakouts, investors should only do buying when they see that the breakout isn’t false (and that it closes above the given level). However, a trader should do at least partial buying on an intraday basis when it breaks out above the given level (using a buy stop order), and then if at the end of the day it turns out to be false and it closes back below the level, then traders should immediately get out. But if not false and it hasn’t run too far, then later in the session, traders too can do additional buying.

So, as you can see from the reply it's different depending on whether your are a trader or an investor, as an investor should wait for strong close above above the target level they are watching before getting in. So in practice you can set an alert in your chart software (if it has that option) to notify you by email when the target level is breached and then be ready near the end of the trading day to buy if it's going to close the day strongly above the target level. So, you'd buy in the last 5 to 10 mins before the close of the day imo.

Thanks. I'm mainly an investor - though perhaps with the amount of time I seem to be investing I think I ought to try a bit of trading.

It seems that perhaps my 'watch like a hawk and then buy' strategy is perhaps close to that stated above - if I accept that suddenly rising stocks may fall back to some extent so I will have to put up with losses in the short term - which should nullified by later gains. Just need to discipline myself to not leave it too long, eg buy on the day, not the next day - and if I miss it keep an eye out for a pullback. Pullbacks seem harder to spot though - a lot of shares seem to rise in a stepwise manner, MBH.L, THAL.L (not the best examples).

I'm not in a position in general where I can buy during the trading day so I'm looking after the end of the day.

I've set myself up a database that grabs share price data and records peaks and slowly degrades them back towards the averages. This seems to work reasonably well in detecting potential breakouts - as well as showing what is currently rising to recent highs. Basically I don't need to manually set the levels. It narrows down the number of charts I need to look at. Perhaps I ought to post a few of these breakouts here.

For a trader it's different as for example if you are in the UK then you can use a spread betting or CFD account, which both have the option to do a partial buy stop order order like he suggests in the answer above and then complete the purchase near the end of the day if it proves to not be a false breakout, or get out of the partial position if it closes back below the breakout level for a small loss.

I'll have to read into that. It seems that there are costs associated with holding long positions in a CFD account - looking at one provider you are charged the LIBOR rate for the money 'borrowed' for the shares. Though with interests rates low and hopefully a share doing better than LIBOR then perhaps that is not much of an issue - and perhaps my 'transfer' plan is a mitigation strategy. I'll have to look into CFD accounts. Thing I'm wary of is a small amount of 'finger trouble' causing a miss-placed stop that results in the account being wiped out - hence I'd not want to hold too much in a CFD account. I'll need to learn how the stops work.

Another way to avoid false breakouts is to make sure that you only trade A+ picks that meet the four main requirements of the method. i.e. price action breakout with a rising 30 week moving average, at least 2x the weekly average volume, relative performance above the zero line and above any near term resistance. As you'll find that you get a lot less false breakouts if you really focus on meeting all the key criteria of the method. So focus on the quality of your picks and don't settle for anything less.

I'm looking at a 150 day moving average (same as or v similar to 30 Week). I find volume to be a more tricky indicator, what seems to happen now does not, at least in the UK, look as clean as the examples in the book. I do note that the US stocks on the watchlist do seem to behave more like the examples in the book. I also recall, likely in the interview with Stan W, that volume a less useful indactor than it used to be - probably due to darkpools, automated trading and ETFs. However, I'm a newbie so this is just stuff gleaned here and from the net - not personal experience.

I hope that helps.

Thank you for your time.

[isatrader]

Volume is different in the UK and doesn't behave the same as US stocks, but you should still be looking for at least 2x the average volume on the breakout week, but the volume profile following won't look like the US stocks, so that is why I use the cumulative force index indicator for UK stocks as it gives a cleaner view of what the volume is doing imo. You can find instructions for how to create it in the general section.

[pcabc]

Volume is different in the UK and doesn't behave the same as US stocks, but you should still be looking for at least 2x the average volume on the breakout week, but the volume profile following won't look like the US stocks, so that is why I use the cumulative force index indicator for UK stocks as it gives a cleaner view of what the volume is doing imo. You can find instructions for how to create it in the general section.

Thank you. I'll look at implementing the cumulative force index - it looks reasonably simple. I've been looking at On Balance Volume to date in addition the basic chart, relative strength and volume. Looking at volume in a few UK charts - there seem to be spikes on breakout but there seems to be quite a lot of noise in general and spikes seem also to occur when breakouts don't occur - e.g. in trading ranges.

Thanks,

Pete

[Tryst]

Sorry, I didn't know where to post this.

On the second Stan Weinstein financial newshour interview (dated: 02/25/2012)...

http://www.financialsense.com/financial-...s-positive

...at the end, the Interviewer asks Stan who are his main people he listens to in the stock market? Stan didn't give an answer out of potentially upsetting someone by leaving them out. Stan said he could count the people on one hand.

Anyone have any ideas on who these people count be, or has Stan made reference to them in later interviews elsewhere?

[MalcolmSm1th]

I don't know if any of you get the magazine "Technical Analysis of Stocks and Commodities" but there's an article in the February 2014 issue which touches on Weinstein's method and how the article's author uses the signals.

http://http://www.traders.com

- Malc

[isatrader]

Sorry, I didn't know where to post this.

On the second Stan Weinstein financial newshour interview (dated: 02/25/2012)...

http://www.financialsense.com/financial-...s-positive

...at the end, the Interviewer asks Stan who are his main people he listens to in the stock market? Stan didn't give an answer out of potentially upsetting someone by leaving them out. Stan said he could count the people on one hand.

Anyone have any ideas on who these people count be, or has Stan made reference to them in later interviews elsewhere?

I don't have an answer I'm afraid, but is a good question for the next time I try and do another Q&A with Stan.

[gptx]

Hi everyone,

I just purchased Stan's book and it should arrive any day now. I am a complete rookie to the investing/trading world. I have a friend who has gotten me interested in stock investing and have done a ton of reading in the last week. I have decided T/A is the way I want to go and Weinstein's method looks good to me.

My question is this. Before I get started on the book can anyone tell me what to be aware of in the book as I am reading along that is done differently today than when the book was written?

I have read some things here and there about slight variations from when the book was written but with all the reading I have done from different sites I can't remember what they were. From now on I will copy and paste to a document as I go for reference.

Thanks for any advise and thanks for this forum! This site was another reason I wanted to go with Weinstein's method!