[isatrader]

How much do you compromise on the signals?

I've been looking at tons of charts, and I've found quite a few that show a breakouts where the everything looks good, but the volume is not at the 2x level, or the relative strength is climbing but not above the zero line.  Looking back at these charts, I see similar "imperfect" breakouts that lead to huge stage 2 moves.  Do you tend to hold out for the "perfect" breakout, or do you tend to compromise a bit?  If you do compromise, which of the criteria are more solid, and on which do you hold back a bit (i.e., will you allow volume to slip a bit, but hold inviolately to the relative strength requirement).

With so many stocks to trade (around 5000 in the US market alone) you'll find lots of big moves when looking back that didn't meet the methods criteria at the breakout point. As stocks move for so many different reasons, and so might not always fulfil the criteria, but still go on to have big moves. Large caps especially, as they rarely meet the volume part of the criteria. However, I'm of the opinion from my own experience that it is fine to miss most of the stocks that don't, as the point of the methods criteria is to give you trades with a higher probability of success, and a framework to minimise loses when they don't work. As in my opinion, trading without a method that has an edge, is just basically gambling. So it doesn't matter if its Stage Analysis, or any another method. It just needs to give you an edge so that you can make consistent gains and minimise loses and sleep well at night. So don't be tempted to compromise imo.

The second question has to do with stops, and trader versus investor stop strategy.  In looking at charts, I generally will pull back to a 5-year chart.  Say I have a stock that has a pretty choppy history, with really nice, strong stage 2 moves, but then dropping just as sharply, and giving back about half of the move before crossing the MA.  With a position with that sort of history, do you ever say, "although I'm primarily an investor, on this positions I'm going to use a trader strategy with a trend line, to lock in the most gains based on a history of more (for lack of a better word) violent moves?"  Or do you decide at a macro level that you are only going with setups appropriate for either trading or investing, and leave the others behind.

Trading both the investor and trader methods simultaneously is very difficult imo, as they involve very different mindsets. From my experience I've found that I'm less willing to hold investor positions through the pullback phases, when I'm also using the trader method on other positions at the same time. So I have two completely separate accounts. One for trading US stocks on a short term basis, and one investor account for trading the indexes and sector ETFs, and the occasional large caps stock. As this helps me to keep the two methods separate to a certain degree. But I still find it hard to hold the investor positions when I can see a short term top forming and am selling out of my short term positions.

So I would suggest initially trying to work out which type of trader that you are. Do you want to be checking the charts daily, and getting in and out of positions on a regular basis, just catching the momentum part of the move for a month or two. Or are you happy to check the charts on weekly basis, and and buy and hold a position through multiple pullbacks and sideways consolidations, that might give back 50% or more of the gains each time for long periods of months at a time, before potentially continuing higher for larger gains. Both methods can beat the market if traded correctly, but not many people can stick to the rules, and get influenced by other things, like the financial news channels, social media, or other people. Turn all of that off and just stick to a method, and you'll do much better than most.

OK, one more NOOBISH question.  As one who is just beginning to look at the charts on a weekly basis, I'm finding lots of charts that have broken out in the last 1-2 months.  How far into a move will you generally buy (say that the move back to the MA has already happened).  Do you tend to say, "Missed opportunity, I'll jump on the next one" or are you more likely to say, "Better late than never, this one seems to be moving will, I'm on it!"

The Stage 2A phase can take up to six months in a lot of cases, so don't be scared to get in when the stock has had a good initial Stage 2 advance of 100% or more and then has consolidated for a few months or so and formed a proper base with a Volatility Contraction Pattern (VCP) - this parts very important imo (read Mark Minervini's first book "Trade Like a Stock Market Wizard" to learn more about it), as Stage 2 tends to have multiple phases when a stock meets all the criteria and has a strong initial advance. So if it then breaks out again higher, from what might look like or be a Stage 3 consolidation, but to new highs, with a low risk entry and strong volume etc. Then it's a great time to get in. As the stock is in a strong uptrend already, and so has already worked off any previous resistance, and has formed a new higher base to launch from. In my opinion these are some of the best times to get in, and from my experience tend to have better odds of success than getting in after a Stage 4 decline, which so many new traders to method go for initially. So instead buy high, and sell higher - but always do so from a low risk setup that meets the methods criteria.

Always think about and plan for what you might lose first, before you think about what a trade might gain. Assess risk first always!!

I hope all that helps