Market Timing Investing

[robertbanking]

Hello you very intelligent and caring people that make up this forum. I do hope your day is going well so far.

I research shares i am going to buy in detail, from looking at how the company makes profits, how much debt the business has, what do employees say about working for the company. I also look into the annual accounts for the last few years in detail. However i am really poor at trying to buy stocks on dips when adding them to my watchlist. I understand it might not be wise buying a stock when it is reaching its 52 week high, but does anyone kindly please have any thoughts on finding a better way to trying to buy stocks at more reasonable levels? I know there is no magic formula, but if anyone could kindly help me with this i would be forever grateful and thankful.

Thank you so much for your time. Sending you lots of good wishes and hope you enjoy your day. Take care.

 

[robertbanking]

Hello and hope you are all doing well. Does anyone kindly have any thoughts or advice on this please, even if its only a few sentences, i would be very grateful for any advice you can please give? Thank you very much and i appreciate any advice you can give. Take care and look after yourself.

 

[1nvest]

when you say "dips" it sounds to me that you are looking at swing trading
getting into a trade, during an up or down trend in the stock and then looking to ride that wave.
when you say "market timing investing" however that's not looking for dips or value at all. thats looking at position trading to get in at the beginning of longer term trends that could last many months
what kind of timescale are you looking to hold for
if you look up swing trading vs position trading it will give you an idea of where you think you are and looking to achieve, then suggestions might be a little more pertinent.
there are many books on both, likewise value investing which is what you describe also, however value investing is less concerned on the technical aspect of trading/investing for the longer term

 

[1nvest]

you could also try taking a look at this thread below. an excellent thread on position trading

Stan Weinstein's Stage Analysis

I started this thread for a place for people to discuss Stan Weinstein's method of stage analysis, as I read his book "Secrets for Profiting in Bull and Bear Markets" from 1988 in late 2010 and was very impressed with his four stage breakout method. For those that haven't read the book and are...

www.trade2win.com

 

[robertbanking]

Thank you very much for responding 1nvest i truly appreciate your response, that is very kind of you.

I think i am more looking at Position Trading, i appreciate you providing further insight into this. I am looking to invest for a period of 12 - 18 months and to get in at the beginning of longer term trends. For instance i researched ZIM Integrated Shipping Services (NYSE: ZIM) and believe this has a long term outlook of reaching $80. Over the last 6 months on 14th December 2021 at 48.20 USD, 25th January 2022 at 57.22 USD and 25th April 2022 at 51.46 USD would have all been good times to buy on dips for the longer term trends. As i am planning on buying in tranches over a few months. I kindly wondered if you please had any advice on how to spot these good times to buy please for Position Trading, i would be enormously grateful and thankful for any support.

Thank you very much for writing back to me. Sending you lots of good wishes and hope you have a pleasant day. Take very good care.

 

[1nvest]

Thank you very much for responding 1nvest i truly appreciate your response, that is very kind of you.

I think i am more looking at Position Trading, i appreciate you providing further insight into this. I am looking to invest for a period of 12 - 18 months and to get in at the beginning of longer term trends. For instance i researched ZIM Integrated Shipping Services (NYSE: ZIM) and believe this has a long term outlook of reaching $80. Over the last 6 months on 14th December 2021 at 48.20 USD, 25th January 2022 at 57.22 USD and 25th April 2022 at 51.46 USD would have all been good times to buy on dips for the longer term trends. As i am planning on buying in tranches over a few months. I kindly wondered if you please had any advice on how to spot these good times to buy please for Position Trading, i would be enormously grateful and thankful for any support.

Thank you very much for writing back to me. Sending you lots of good wishes and hope you have a pleasant day. Take very good care.

Hi Robert, position trading and getting into a trend at the beginning is precisely what stage analysis is all about

Stan Weinstein's Stage Analysis

I started this thread for a place for people to discuss Stan Weinstein's method of stage analysis, as I read his book "Secrets for Profiting in Bull and Bear Markets" from 1988 in late 2010 and was very impressed with his four stage breakout method. For those that haven't read the book and are...

www.trade2win.com

My advice is go through the material. How to spot these is covered. The method uses a blend of a moving average and price action relative to the average. so its possible to be able to spot these and put those onto a watchlist. there are a vast number of posts, however it covers screening for potential stocks.
i use the method, along with others, and i honestly couldnt recommend a better approach. get the book, i dont think you would regret it

there are of course alternative methods you could look into.
A very common method to determining new trends is by using a momentum indicator. Its a measure of where price is now to where it was in the past. The Rate of Change. its a method used very common in hedge funds for both trend definition and stock rotation. very easy to screen for any stock or index which has crossed recently.

another method used is where price is in relation to its average. not a moving average cross over, but whether the close is above or below its 200 day moving average. very simple, yet still very effective

again alternatively you may have your own trend definition. the macd is a brilliant indicator however the only caveat is its not to used for exits. the macd uses two moving averages. to enter i think its fine, to wait for 2 averages to cross to get out is tantamount to negligence. but like i say, to spot entries, very easy and very reliable

again, another method is the highest high. you mentioned 52 weeks. i agree, by then you've wasted so much time. so look at shorter lengths. you are position trading so your chart timeframe of choice is going to be the weekly or even monthly. put a 6 month, or 26 week donchian channel on your chart. very effective.

Robert, there are loads of ways of defining the trend, you can simply mix and match the above to your hearts content. each one of these above will give you success rates going into late 60-70%. they all do the same, very very successful methods of market timing. look at each, and work out what works for you. and each of them can be screened to give you an idea for entries. i find the stage analysis method absolutely unbeatable for exits. but you wont be screening exits, you manage that once your in.
personally i dont screen for my entries. i have a strict list of ETFs which cover the broad spectrum of equity, bonds and commodities. And all i need to do is eyeball these each week for anything new and by their very nature will keep me in a trend. i find individual stocks unnecessary for what we are looking to do. ie beat the market

hope this helps. get the book btw

 

[1nvest]

Once we've defined the trend, and you now want to add to your existing position.
two common ways to do this.
1) above, i mentioned various ways to enter the trend..it might be the macd provides a signal, or the donchian etc. so you could add to your position depending on the signal. 25% on the donchian, 25% on the ROC, 25%....you get the picture. this provides you with an element of risk, as the confluence of different signals begin to weigh more in your favour your position grows. Personally, one of my favourite approaches
2) you simply wait for a pullback. and then enter when you break the previous high. so in your case with ZIM. your dates are ok. however i personally want a little more of a retracement. you could again use the rate of change again. its objective, whereas i find the topic of a retracement largely subjective.
3) another common method, use two moving averages, wait for price to retrace between the fast and slow, and then enter when it closes back over the fast.

again loads of different ways. however again, you shouldnt need to have to look for these in the first place. you should already be in the position. do you see? you would have entered right at the beginning and be managing it week by week. set a line at the previous high, once it breaks, add more.
you should be managing your positions, so you need to keep your watchlist small enough that you can manage them all.

hope this is making sense...

 

[robertbanking]

Thank you very much for responding in so much detail 1nvest you are an amazing person. I truly appreciate the time you took to reply and leave your very important feedback.

I think the problem is i have been reading many books on investing and it all over complicates things as each book offers a different kind of advice or scenario. However i am really grateful for your short summary you have provided in your posts which was really clear and easy to follow. You mention a common method to determining new trends is by using a momentum indicator. The Rate of Change, do you kindly have any further information on this please and how this can be utilised i did not fully understand this? Lastly do you please have any examples of the ETFs you use for your Position Trading so i can kindly review some of the share graphs please, i would be very thankful if you could kindly share?

Thanks again for all your help you have been a star. Everything else you mentioned i followed and i will definitely buy the book i appreciate your suggestion. Hope you have a fantastic day and take care.

 

[1nvest]

Thank you very much for responding in so much detail 1nvest you are an amazing person. I truly appreciate the time you took to reply and leave your very important feedback.

I think the problem is i have been reading many books on investing and it all over complicates things as each book offers a different kind of advice or scenario. However i am really grateful for your short summary you have provided in your posts which was really clear and easy to follow. You mention a common method to determining new trends is by using a momentum indicator. The Rate of Change, do you kindly have any further information on this please and how this can be utilised i did not fully understand this? Lastly do you please have any examples of the ETFs you use for your Position Trading so i can kindly review some of the share graphs please, i would be very thankful if you could kindly share?

Thanks again for all your help you have been a star. Everything else you mentioned i followed and i will definitely buy the book i appreciate your suggestion. Hope you have a fantastic day and take care.

I can only imagine the complications come from the potentially many different ways of categorising the trend. It becomes confusing and frankly uneccessarily so. They all to a degree do the same thing, and people spend so much time wondering what is the best way. Any way will do as long as, mentioned earlier, you don't forget the exit. Its by far the differentiator.
The ROC. There are many books written about the subject with some really excellent examples of simple but really effective strategies. One of these books, called dual momentum, uses the 12 month ROC as the primary trend. Using a monthly chart buy when the momentum over the last 12 months becomes positive. My problem with this is its quite late to enter and exit. However its incredibly simple and will deliver results
My ETFs cover US index, spy, qqq, mdy and world efa
Bonds are tlt, agg and ief
Commodities bcog, and then one gold
If none if these are trending you just move to cash
There are equivalents to these etfs whichever country you are from
Good luck and if you have any questions just let me know

 

[robertbanking]

Thank you very much indeed 1nvest i cant thank you enough for your straightforward and amazing help, it really means the world to me. You are a wonderful human being.

I just kindly wanted to use an example with you please, just to check my understanding is correct. For instance the SPDR S&P 500 ETF Trust one of the US ETFs you mentioned. Not sure if you hold this specifically. It is currently 401.72 USD it has fallen from around 480 USD from January 2022. It has a 200 day moving average of 435.84 USD. It is currently under this and it currently is showing a bearish signal. Using this 200 day moving average indicator when would be the best time to cover this ETF to try catch the upswing when this turns bullish please? Would you wait until this starts climbing again or wait until this hits the 200 day moving average again of 435.84 USD, but by this time you might have missed out? I would be forever grateful for any advice on this it would mean the world to me.

Thank you so much for all your help, the posts you have made over the last few days have been more helpful, clear and concise than any books i have read. You are a wonderful person and hope you have had a fantastic weekend and hope you have an even more fantastic week ahead. Thank you again for your support.

 

[1nvest]

Hi Robert, the monthly chart attached. with a few of the indicators i mentioned on it.
The donchian 6 month has already been passed on the lower channel, its trading below its 10month (or 40 week or 200 day moving average). the ROC 12 just turned bearish and on the weekly, which isnt displayed, the stage analysis stop was hit some weeks ago. little going for it at all at the moment. so no, i certainly dont hold it

in answer to your question, were i to buy into this again, and my reason for entry was the donchian, yes i would be waiting for the higher high channel to be passed again before i would be considering this as shift back into equities. if it were the ROC (red line displayed), i would be waiting for the monthly close to close above 0. i would be waiting for the close to close above the 10 period SMA or i would be waiting for the weekly chart to show signs of it moving back into a stage 2 per the stage analysis method or the weekly macd to have closed above zero.
or as i mentioned earlier, gradually you could move a portion back into equity depending on each of these factors

what i think you should do, is go through each of them, assess them for your own risk profile, accuracy, or as mentioned you could use a weighting of some sort depending on your confidence factor. how quickly do they get you into a trend, how many false signals does it produce that would potentially put you off. the MA gave a but signal the month before, then back to bearish again. does a signal like that work for you..would you rather a confluence of factors to determine your entry. it could be 2 or 3 out of all of the signals generates a bullish entry. you could add additional signals.
as mentioned i use stage analysis, it makes up the largest portion of my exposure. i use the other methods described above to help make up my mind, i use other criteria (weekly) on top of these.
I dont like the idea that one signal says im bullish or bearish, as I dont think the market is that binary.
play around Robert, and see what works for you

then i do the same for the other asset classes i mentioned.
lastly, i weight also the full exposure i have to any of these asset classes. i will never for example be all in commodities due its own risk profile and volatility just because im not in equity. i weight more on bonds were i in bonds as they carry the lowest risk profile, ie have the lowest volatility

i keep it simple, with nice simple methods of determining trend direction. yes sometimes i get a wrong signal, however im not expecting to be right 100% of the time. its rare though that i get a wrong signal when each of the signals has said bullish, but it can happen. i find the ROC and the donchian to be the slowest. by the time ive got to that signal, im mostly in or out already

 

[robertbanking]

Thank you very much 1nvest for the further advice you shared, that was really helpful and kind of you.

I agree with your advice, i will play around with various indicators and how quickly they get me into a trend and how many false signals does it produce. Once i get my confidence i can follow a set plan like yourself and using various indicators to guide me. Can i kindly ask what is the SharePad software you use, is this paid software please and have you marked the indicators onto the chart? The SPDR S&P 500 ETF Trust the 200 day moving average is 435.84, once it passes the 8 day moving average of 404.79 would this kindly be considered a bullish signal please? Or further would it be best to wait until this pushes through the 20 day moving average of 415.01 please?

Thanks again for your support and patience with this, you have been more than brilliant. I am very sorry for all my questions but i will go have a play around with things as it all is coming together thanks to your amazing advice. I really hope you have the best week ever, sending you lots of good wishes.

 

[1nvest]

I use sharepad or its onpremise alternative sharescope as I use in addition to ETFs, mutual funds. Its paid for.

if price were to move through 404 i would see zero significance in that whatsover. if it passes through its 20 days, zero significance. if it was its 30 week, it peaks my interest, because of stage analysis.

 

[robertbanking]

Thank you very much 1nvest for replying that makes perfect sense, i completely get you. Things are starting to come together.

Just lastly and sorry again to ask a final question, do you kindly know any software or screener that will find shares or ETFs that have broken their 200 day moving average and on a bullish trend as this should make things much easier?

Thanks again for all your time and support you have been beyond amazing and i cannot thank you enough. I truly hope you are staying positive and you have a successful and happy week. Many thanks for all your support.

 

[1nvest]

for the criteria we've just gone through, i would have thought most screeners would do that
prorealtime have a free version you could try and see if they have that capability
i dont use screeners, as i said, i have a small number to look through and if i did i have it with the software i use

all the best though

 

[Lopata]

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