Although I intend to give more weight in this blog to trading futures, I promised I would mention a couple of simple methods, -quickies, which are quite profitable; and, what’s more important for me, help complement futures’ trading.
First, I’ll mention the Muddy method. Muddy (alias murknd) is a very nice and generous guy, – but somewhat sensitive to people meddling with his method; so, I’ll give a very brief description of his method and ask that you to get the specifics here and some general commentary from the StockFetcher Muddy Method group at Yahoo.
In not so many words, from a group of poorly behaving stocks, every morning at the opening, orders to buy are placed for those stocks that show strength reversing their prices.
The previous night’s selection of stocks is based on different criteria coupled with increased volume; stocks touching a lower Bollinger Band, or/and with RSI(2) less than 1, or/and with three or more down days… and more.
The opening strength is gauged by a sustained opening higher than yesterday’s closing for 15 minutes, which triggers a buy order.
Let’s stop here for a moment. In essence this method posits that extremely badly behaving stocks present a good opportunity for a quick trade; to buy on a reversal of prices at the opening, selling shortly afterwards.
Check Mike Parker’s Freebie PDF for some excellent exit criteria and stockhideout discussions, —you’ll have to search for the Freebie file yourselves, I can’t setup a link.
And the interesting lesson for us, is that we may transpose these tools into futures trading; with the more general understanding that extremes tend to regress to the mean.
To be continued.