RE: Stage Analysis Beginners Questions
(2019-12-14, 09:09 AM)stanhao Wrote: I would like to ask the stan forest-to-tree method. If the broad market index has not yet broken through the pressure zone, but there are individual stocks that have broken through, is it necessary to buy individual stocks first, or to buy individual stocks after the broad market index breaks?
Hi stanhao. I'm not aware of a "pressure zone". Could you give an example and perhaps give us your interpretation of the stage it's in.
With regard to the forest to the trees, if the broad market is 4 there is no buying. If the market is a 3 or a 1 I personally would be still looking for strong sectors however I would be conscious that the market could still drop and for that reason I'd be looking to use a fraction of the position size, waiting to increase when the market confirms its stage. That way I'm in if it takes off but mitigate the risk should it not
Similarly you could use tighter stops such as the trader method until you get confirmation
I'd be conscious of where price is in a stage 3 for example. Stage 3 with price below the average I'd be very wary of and my position size would reflect this further. Erring very heavily on the side of caution
In all backtesting I've done the market state is the primary reason for significant drawdown and losses. So get these right and pay close attention. If in doubt stay out
The market will show itself along with many trades to confirm it's intended direction
Hope this helps and again show us what your thinking