[isatrader]

I wanted to ask your experience with MA types. I see you're always using SMA's. Do you have any objective reason for that? Eg did you ever backtest performance when using SMA vs EMA?

The method is completely discretionary and mostly manual, so backtesting would be very difficult, as beyond coding the stages, which no one has done accurately as yet, although many have tried, there are multiple external factors beyond the individual stock chart that need to be considered at the same time before making a trading decision, as the decision to enter can't be made on the stock chart alone. So like technical analysis it's more of an art than a science, and every single person will trade it differently. As it not a mechanical system.

I've spoken to literally thousands of people over the last 13 years about the method since I started the discussion threads on another site, before moving it here, and the common theme is that every single person adds their own style to it from knowledge that they have or acquire elsewhere in their trading journey. I could teach 100 people the exact way that I do it, and they would all do it differently than I taught. It is just the nature of people.

The moving averages play an important part for me in helping to identify the Stages, as for example for a stock to move into early Stage 2 the price needs to above a rising 10 week SMA, plus rising 30 week SMA, and the 10 week SMA should be above the 30 week SMA, as well as just being above the 200 day SMA – which doesn't have to be rising.

If you use EMAs or Weighted MAs, you can get whipsawed more, as encourages earlier entry in newer traders to the method. But as you get more experienced with the method you'll find that the type of MA that you use doesn't matter as much, and it's possible to not have any moving averages showing and still determine the Stages just the same. As you still should be considering all of the other of the other important factors as well, including those not on the chart itself, such as group strength and the market breadth, which to me are the most important things.

So don't get to bogged down in it. Use whatever helps you to see the Stages accurately.

I use the 10 week SMA and 30 week SMA on the weekly chart, and 21 day EMA, 50 day SMA and 200 day SMA on the daily chart. As this combination is enough to see at glance when scanning through charts quickly, the short, medium and long term position, and determine the Stage very easily. But it took looking at a lot of charts every day before it became easy to see.

While we're talking about backtesting, another question pops in to my head; What is your avg win rate using your strategy?

I would say that my average win rate has been under 50% over the years, but that generally my losers have been much smaller than my winners. So the equity curve has been rising over the years, but it's certainly not been a straight line. And even to this day, I still suffer from making occasional impulse trades that break my rules (not the methods rules), as like I said, everyone adds their own style to it, which in my case is the addition of techniques from multiple sources, such as Dorsey, Minervini, Elder, Wyckoff etc.