this blog will keep me accountable to the new trading method I have adopted - the RSI-X. Based on a subtle interpretation of the standard indicator I will be looking here primarily at Australian stocks, but may include a few American ones from time to time.
I like to see 4 elements present before I am 'convinced' a trade is valid
1. A crossover on the 'x' period RSI indicator [the 'x' factor is revealed in my e-Book]
2. Significant movement through the 'x' period Weighted Moving Average
3. A higher Low or double bottom formation for long [buy]trades or a Lower High or
Double Top formation for short [selling] trades
4. Above average volume
I am trading CFD's on the Australian Securities Exchange at present and will look to trade the SPI 200 and S&P 500 at some point in the immediate future.
On all trades I currently use a maximum of 2% risk- this is achieved by calculating maximum risk on a trade and then dividing this into my 'risk capital'..... so for example an account of $20,000 lets me risk $400 [$20,000/2%]. let's assume I have 40 cents of risk on a $10 stock then I can buy...........
value $10.00
RISK $(0.40)
account $20000
2% of AC = $400.00
#0f shares = (1,000.00)
Let's look at some of the current trades in play:
This chart is used courtesy of INCREDIBLECHARTS.COMInitially I was alerted as the stock moved through the weighted moving average after making a Double Bottom formation. I was not 'convinced' by the volume and let it go. After the stock had made a new 'significant' HIGHER LOW and then broke the Weighted Moving Average I entered the trade - slightly early as it retraced immediately, but then the stock made a significant move- which SHOULD have been the entry. Still in this trade with stop loss placed at 100% R.O.I. around $16.50.
Exit strategy: I will run a trendline up the RSI and any break of this means an exit below the close of the 'signal day' . If the trade progresses to 200% R.O.I. I will move stop to 150% - alternately- as this is a medium term trade I will use the Weighted Moving Average as 'HARD STOP'.
ARQ- yahoo code arq.ax
This chart is used courtesy of INCREDIBLECHARTS.COM
Occasionally a trade will 'jump out' at you..... and this one certainly did- and then it JUMPED up a huge gap! So were my four criteria satisfied.....
RSI-Xover- YES
Weighted Moving average crossover & Strong bar- Yes
Lower High and support area-YES
Volume above average- Yes
To give this some additional 'Ooomph' there was a nice 'penant' formation.
After entering around 1.32 & 1/2 on a strong bar and wma cross with just over average volume the stock advanced marginally.... and was then sent the skywardon an anouncement that the company [oil exploration & production] had bought into a mob called Wandoo- who already had deposits in place.
My 100% R.O.I. target was hit at 1.40 and after an advance to 1.46 I placed my stop loss at the 100% R.O.I. point. It has held thus far with a brief glance on this day of writing, before closing Up 4 cents at 1.46.
I currently also hold IFL.ax, OXR.ax & am short on AXA.ax.
Paul J Penton is CEO of http://mymillionairebuddy.com : Free Wealth Creation Resources.
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