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StockHistory Help
Below are links to a number of case studies that illustrate both my trading strategy and how I use StockHistory to support that strategy. It is important to appreciate that all the case studies are for short term trading or occasionally medium term as that is what it is designed to support. Whilst I still use it to monitor long term holdings I certainly don't use it to "trade" those holdings. The strategy for such holdings is very different and generally based on fundamentals rather than technical analysis. I use two sources for my data - ESI for realtime data and Ionic's ShareScope for technical analysis of end of day data.
Note that the strategy described here is purely for short term trading over a maximum period of 20 to 25 days.
Fundamentals are used for a first pass to select stocks that may be of interest, generally filtering on things like eps, pe, peg etc. Then the graphs of the selected stock are scanned for interesting patterns using a TA package with an historic database of end of day data. Stocks whose graphs look interesting are then added to a stockwatch. This can either be done directly on line in the ESI stockwatch or added to the stockwatch in StockHistory (which will automatically add it to your ESI stockwatch next time you download).
Now comes the "watching bit". Exactly what I am watching for depends upon the pattern in the chart, but generally it will be some significant increase in price forming maybe a recovery pattern or confirming a continuing growth pattern. This might be detected by setting up a start rise. Or it may be a case of waiting for a resistance level to be broken, in which case a fixed price alert would be more appropriate.
Once a Stock has been purchased a stop loss needs to be set up. Stop losses are crucial to my short term strategy and the decision to sell is effectively made when the stop loss value is decided upon, it is simply acted upon if that alert is triggered. The stop loss value is not fixed but changed as circumstances change. The initial value is decided based upon the maximum loss that you are prepared to face if the price should fall after buying instead of rise. I usually set 10% as my maximum loss at this stage however I do not set up a 10% stop loss - there is already a loss from the spread and the trading costs (for short term trading I generally do not buy with a spread greater than 4% unless I am very confident of the potential). Enter the stock purchase details and check the portfolio view to see the initial profit/loss. This is calculated based on the buy price and the current bid price and the trading costs thus giving a true view of the potential profit, or at this stage loss. This loss is deducted from the 10% stop loss, so if there is an initial loss of 4% then set an initial stop loss of 6%. If this stop loss is crossed then be ruthless and sell. Once the stock has moved into profit I reduce the stop loss to around 5% - for short term trading I do not have time to ride out falls in price. The target must also be considered; this should have been determined before buying, and may be based the next expected resistance level or simply the desired level of profit. A fixed price alert is set at that level, and once reached either the stock is sold, or the stop loss reduced further to ensure the profit will be locked in. I generally do the latter and then reduce the stop loss further as the price rises, until ultimately I may have a stop loss as low as 1% or less; effectively triggering me to sell on the slightest fall. Again the decision to sell is made when the stop loss is set, if it triggered it is simply acted on.