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+--- Thread: Stage Analysis Beginners Questions (/Thread-Stage-Analysis-Beginners-Questions)
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RE: Beginners Questions - isatrader - 2014-01-23
(2014-01-23, 12:42 AM)gptx Wrote: My question is this. Before I get started on the book can anyone tell me what to be aware of in the book as I am reading along that is done differently today than when the book was written?
I have read some things here and there about slight variations from when the book was written but with all the reading I have done from different sites I can't remember what they were.
Hi gptx, welcome to Stage Analysis, and I think you've made a wise decision to learn Weinstein's method from the outset, as it took me many years of experimenting with other methods before I found Weinstein's book and to started to improve.
To your question. The changes to the method are very minor, so the only thing in the book that's not really relevant anymore is the section in Chapter 3 on buy-stop orders, as these days Weinstein recommends buying a close above the target breakout level, and only using partial buy-stop orders with the trader method.
The other change to be aware of the Four Stages, now have sub stages also, which has further helped understand a stocks position in it's cycle. So there are 13 sub stages in total:
Definitions of the Stages and Sub-stages
Stage 1A Start of a base. Needs much more time.
Stage 1 Basing Phase. May begin accumulation.
Stage 1B Late in base-building phase. Watch for breakout.
Stage 2A Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 Advancing Stage.
Stage 2B Getting late in uptrend.
Stage 3A Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 The Top Area. Start to reduce positions.
Stage 3B Has become increasingly toppy. Use rallies for at least partial selling.
Stage 4A Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 The Declining Stage. Avoid on the long side.
Stage 4B Late in downtrend. Much too soon to consider buying.
Stage 4B- Although not yet “officially†in Stage 1A, stock has now seen its low for the cycle.
Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.
Other than those, the method is the same today as it was when the book was published in 1988. So my advice would be to read the book, take notes so you can easily reference pages again. Then go through the old trade2win thread that I did, which will answer a lot of the questions, and then go though the newer stuff on here and start to learn to recognize the stages. As once you can instantly identify the Stage, you'll find looking through stock charts for potential trades a much easier process.
Good luck and feel free to ask any questions on here and myself or one the other members should be able to help you.
RE: Beginners Questions - gptx - 2014-01-23
(2014-01-23, 01:14 AM)isatrader Wrote:(2014-01-23, 12:42 AM)gptx Wrote: My question is this. Before I get started on the book can anyone tell me what to be aware of in the book as I am reading along that is done differently today than when the book was written?
I have read some things here and there about slight variations from when the book was written but with all the reading I have done from different sites I can't remember what they were.
Hi gptx, welcome to Stage Analysis, and I think you've made a wise decision to learn Weinstein's method from the outset, as it took me many years of experimenting with other methods before I found Weinstein's book and to started to improve.
To your question. The changes to the method are very minor, so the only thing in the book that's not really relevant anymore is the section in Chapter 3 on buy-stop orders, as these days Weinstein recommends buying a close above the target breakout level, and only using partial buy-stop orders with the trader method.
The other change to be aware of the Four Stages, now have sub stages also, which has further helped understand a stocks position in it's cycle. So there are 13 sub stages in total:
Definitions of the Stages and Sub-stages
Stage 1A Start of a base. Needs much more time.
Stage 1 Basing Phase. May begin accumulation.
Stage 1B Late in base-building phase. Watch for breakout.
Stage 2A Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 Advancing Stage.
Stage 2B Getting late in uptrend.
Stage 3A Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 The Top Area. Start to reduce positions.
Stage 3B Has become increasingly toppy. Use rallies for at least partial selling.
Stage 4A Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 The Declining Stage. Avoid on the long side.
Stage 4B Late in downtrend. Much too soon to consider buying.
Stage 4B- Although not yet “officially†in Stage 1A, stock has now seen its low for the cycle.
Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.
Other than those, the method is the same today as it was when the book was published in 1988. So my advice would be to read the book, take notes so you can easily reference pages again. Then go through the old trade2win thread that I did, which will answer a lot of the questions, and then go though the newer stuff on here and start to learn to recognize the stages. As once you can instantly identify the Stage, you'll find looking through stock charts for potential trades a much easier process.
Good luck and feel free to ask any questions on here and myself or one the other members should be able to help you.
Thank You!
That's good to know! I am really anxious to get started on this.
I also ordered John Murphy's book, "Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications". I'm thinking with these two books I will hopefully have a good foundation to build on with Weinstein's technique.
Thanks Again
RE: Beginners Questions - Tryst - 2014-01-23
Hi gptx,
I would also recommend the following for TA...
http://www.amazon.co.uk/Technical-Analysis-Trends-Robert-Edwards/dp/9659124139
This is the book that ultimately put Stan Weinstein onto the path to where he is now. Stan even says so himself right at the start of one of his interviews on the Financial Sense newshour. It is the one dated - 11/09/2012.
http://www.financialsense.com/contributors/stan-weinstein
I listen to these interviews time and time again when I have a free journey to work in the car. I'm trying to understand more how stan thinks/works. I pick up something on each list. I can't recommend these interviews enough.
RE: Beginners Questions - gptx - 2014-01-24
Thanks very much Tryst!
Sounds great, I will check those out
RE: Beginners Questions - MalcolmSm1th - 2014-01-24
I've just gone through all of the positions which I opened in the last twelve months and which I closed for various reasons.
Some I got out of because they dived and I did right to get out of and, as it happens, most of these are ones which I shouldn't have bought into at all. For example buying below the Moving Average or when the MA was falling. Or when the share as a whole was falling.
Apart from my timing to get into a share which I think is far too late as a rule I find that I am jumping out far too early. Yes, I am making a profit this year but that seems to be despite myself. I have found no end of two or three baggers (such as XAR.L, SGP.L) which I made money on but I should have held on longer.
So, a question to the board, if I may. How often do you all look at the markets and one's positions (each day, each week)? More to the point what pychological tricks does one have to stop jumping out too early?
RE: Beginners Questions - isatrader - 2014-01-24
(2014-01-24, 03:24 PM)MalcolmSm1th Wrote: So, a question to the board, if I may. How often do you all look at the markets and one's positions (each day, each week)? More to the point what psychological tricks does one have to stop jumping out too early?
Personally, I look at my positions far too often, i.e. many times a day, which I don't really need to do, but is a habit. As as I'm using the investor method for my stocks, I shouldn't need to look at my positions anymore more than once a day, but even once a week would be enough. But as I said it's a habit from all the years of short term trading that is hard to shake, but I'm getting better and looking less.
The most important thing to decide imo, is whether you are a short term trader or a longer term investor, as that will determine how active you need to be with your positions.
If you are a longer term investor though you need to be willing to sit through the various significant pullbacks, which in large volume, high momentum small caps, can be especially hard as the percentage moves can be extreme. So I guess the psychological trick I've settled on personally is to avoid looking at anything other than the weekly and monthly charts most of the time with a logarithmic scale, as it puts the percentage moves into context and also by clearly defining my risk with the investor stop loss that I will sell at, as there's no point having a stop loss in mind if you're not willing to let the stock go at that price.
Another method I use is to position size using the Average True Range (ATR) of the individual stock, so that the more volatile the stock is the smaller the position will be, and then I look at the ATR percentages instead of the actual percentage to gauge how well or badly it's performing relative to it's own normal range.
RE: Beginners Questions - Correlation / diversity - pcabc - 2014-01-30
As I'm a noob I wonder if this question is appropriate here:
I'm noticing that most shares seem to correlate quite strongly with the various indices and that UK, US, European and Japanese indices seem to be closely correlated as well. E.g. most things seem to be dropping right now and I suspect things will all go back up when we get out of the current pullback.
As an example of correlation a Nordic fund I bought into a month of so back seems to very closely match the FTSE250.
This seems to negate efforts to diversify outside ones home market. The only things that seem not to be tightly correlated seem to be going down or at best widely fluctuating with an overal very long lumpy trend.
It would be nice if diversifying would smooth out the peaks and troughs, but I can't see a good way to do it. What do other people do, just not worry about it?
RE: Beginners Questions - isatrader - 2014-01-31
(2014-01-30, 11:56 PM)pcabc Wrote: As I'm a noob I wonder if this question is appropriate here:
I'm noticing that most shares seem to correlate quite strongly with the various indices and that UK, US, European and Japanese indices seem to be closely correlated as well. E.g. most things seem to be dropping right now and I suspect things will all go back up when we get out of the current pullback.
As an example of correlation a Nordic fund I bought into a month of so back seems to very closely match the FTSE250.
This seems to negate efforts to diversify outside ones home market. The only things that seem not to be tightly correlated seem to be going down or at best widely fluctuating with an overall very long lumpy trend.
It would be nice if diversifying would smooth out the peaks and troughs, but I can't see a good way to do it. What do other people do, just not worry about it?
Correlation in stocks in the world markets tends to be very high due to numerous reasons, and the US market tends to be the main driver in general due to the higher volumes that trade it. So unfortunately diversification within stocks won't protect you from market corrections as the majority have strong correlations with the indexes. So the only way to get true diversification is to trade in different asset classes. i.e. stocks, bonds, commodities, precious metals, property, treasuries etc. As for example stocks and treasuries have a fairly inverse relationship, whereas the others move for their own reasons.