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RE: Beginners Questions - isatrader - 2014-10-17
(2014-10-17, 11:52 AM)GeorgeM Wrote: I read the post. I understand that the method asks for a weekly close above the resistance. What about the stop loss ? If you enter on a weekly close why exit on a daily price move ?
Hi George,
Firstly, welcome to the site.
I don't think you understood the example that Lplate linked too. The weekly close is used for confirmation of the Stage 2A breakout, and you would exit immediately if it didn't meet that requirement. However, you would try to enter near the close on a daily breakout above the level that you had identified as the Stage 2A breakout point, provided that it meet the methods requirements, which I've done a checklist of in the following thread: http://stageanalysis.net/forum/showthread.php?tid=54
Take some time to read through the whole site, as your questions have been covered many times. And take advantage of your free trial to read the posts in the Elite Board as well. As you will find a wealth of information on the method and how people are using it in there.
I hope that helps
RE: Beginners Questions - theory6453 - 2014-10-17
(2014-10-17, 12:38 PM)isatrader Wrote: The weekly close is used for confirmation of the Stage 2A breakout, and you would exit immediately if it didn't meet that requirement.
Great point about using the weekly close as a confirmation of break out... I've had a couple entries where it broke out during the week, but closed the week below the breakout point. I should have exited at that point and would have saved myself some pain if I had.
Thanks for the reminder.
RE: Beginners Questions - nitrader - 2014-10-20
Hi
One area I struggle with is the drawing of resistance / support line to determine entry level and stop levels.
Sometimes I have seen these drawn as horizontal lines through a single high or low and sometimes as a trend line through 2 or more points.
So if I use BT as a current example which (I define) in stage 3b moving into 4a
what would you suggest for the lines to draw for entry and stop positions?
I could have drawn the stop either as a sloping line based upon the series or lower highs OR maybe a a horizontal line through a recent high
Thanks
also can you remind me of the correct settings for the resistance clouds ?
Defining the Stage 4 Breakdown level - isatrader - 2014-10-20
(2014-10-20, 04:11 AM)nitrader Wrote: One area I struggle with is the drawing of resistance / support line to determine entry level and stop levels.
Sometimes I have seen these drawn as horizontal lines through a single high or low and sometimes as a trend line through 2 or more points.
So if I use BT as a current example which (I define) in stage 3b moving into 4a
what would you suggest for the lines to draw for entry and stop positions?
I could have drawn the stop either as a sloping line based upon the series or lower highs OR maybe a a horizontal line through a recent high
Determining the Stage 4A breakdown level takes some practice, as you need to learn to see the position of the key components of the method when you glance at a chart. So it takes time to get the hang of it, but in it's most simplistic form it's when you get the first lower low below a "significant" weekly swing low that formed below the 30 week MA. The 30 week MA must have at least turned slightly lower on the breakdown and relative performance versus the market must be weakening and below it's zero line. So you start by drawing a horizontal line from the first significant swing low that formed below the 30 week MA when it was still rising, and then if you get a higher significant swing low, then you move the horizontal line up to that one instead. For example on the BT chart you posted, the original line would have been at the April low of 350.3 and then would have moved up to the May low of 361.3 once it made a higher high later in the month, and then finally the August low of 365.9 once that had been defined. But, the final two are quite close in price together and so it shows an area of support, which is what you want to see to define a good level to watch.
So this is where the subjective part comes in, as you need to decide if the higher lows are significant enough to warrant them becoming the breakdown level or whether the original low that formed below the 30 week MA should remain the key level. It's not easy, but a good way to think about it is, is a breakdown of the particular low you are watching significant? And does it meet the key criteria that we look for (see the Breakout Quality Checklist thread and reverse all the criteria). If it does, then you can be confident that that's the level to watch. But if it doesn't then it's either not worth considering or might need more time until it can fulfill the key criteria.
RE: Beginners Questions - GeorgeM - 2014-10-20
(2014-10-17, 02:03 PM)theory6453 Wrote:(2014-10-17, 12:38 PM)isatrader Wrote: The weekly close is used for confirmation of the Stage 2A breakout, and you would exit immediately if it didn't meet that requirement.
Great point about using the weekly close as a confirmation of break out... I've had a couple entries where it broke out during the week, but closed the week below the breakout point. I should have exited at that point and would have saved myself some pain if I had.
Thanks for the reminder.
If you buy in the day of the breakout and then you wait for a weekly close above resistance and it is negative, you sell immediately with a small loss, let's say 5%. The question is how much higher do you buy, if you buy after a weekly close above resistance instead of a daily close ? You buy higher maybe 5 %, so you have a wider stop. But the chance of stop being hit is smaller and the winners vs losers increases so you maybe make out that 5 % higher price. If you are going after a big move, maybe 5 % is not such a big price to pay for having evidence that the move is strong enough. I am not sure about this myself, just speculating....
RE: Beginners Questions - isatrader - 2014-10-20
(2014-10-20, 01:20 PM)GeorgeM Wrote: If you buy in the day of the breakout and then you wait for a weekly close above resistance and it is negative, you sell immediately with a small loss, let's say 5%. The question is how much higher do you buy, if you buy after a weekly close above resistance instead of a daily close ? You buy higher maybe 5 %, so you have a wider stop. But the chance of stop being hit is smaller and the winners vs losers increases so you maybe make out that 5 % higher price. If you are going after a big move, maybe 5 % is not such a big price to pay for having evidence that the move is strong enough. I am not sure about this myself, just speculating....
This method is always dependent on whether you are placing an investor position or a trader position, as it is quite different. For example the Stage 2A breakout point is mostly for investors looking for a longer term move of up to 12 months with a price target of 100% or more in most cases as we are looking for A+ candidates. And so an investor will often wait for the weekly close for confirmation before entering and hence like you say have a larger stop loss because of this. But to mitigate the risk, you can use position sizing to limit the risk to within your tolerances. My personal method of position sizing is based on a stocks average true range (ATR) and means I only risk 2% of my account no matter what the percentage distance is. Everyone has their own method for position sizing, and it's not part of the method, so you won't find anything in the book on it.
The increased risk at the Stage 2A breakout point is also why an investor is only supposed to use a half position size on entry at that point, as this also lowers the risk and is such because the initial pullback in early Stage 2 often retraces the entire breakout and some stocks even dip below it for a period before reversing higher. Hence you need a lot of patience to trade the Stage 2A breakout point. Traders on the other hand should focus on continuation breakouts after a proper consolidation, of stocks already in strong Stage 2 advances, where risk is lower and moves are quicker.
RE: Beginners Questions - GeorgeM - 2014-10-27
Hi,
I have a question regarding stop loss placement. When setting a stop loss level do you take as reference a intra day or eod low ? thanks!
George
RE: Beginners Questions - isatrader - 2014-10-27
(2014-10-27, 05:16 PM)GeorgeM Wrote: I have a question regarding stop loss placement. When setting a stop loss level do you take as reference a intra day or eod low ? thanks!
The intraday low and end of day low are the same thing. Did you mean something else?