The Thin Line Between Potential & Trends

The thread is aimed at advanced level of discussion in technical analysis. Basic knowledge of technicals is advised.

As they say, everyone is somewhere up or down in THE LEARNING CURVE of life. I guess it applies to technical analysis as well. Been there and done that are just matter of statements. So I won't state that I KNOW something about technincal analysis. Yet, a question has been surfacing after what i learnt about technicals so far.

I have been a hardcore believer of Systematic Trend Following. In my experience, Systems are good. Not perfyect.. but good enough. Yet the very limitation of them makes them provide Signals of whether a trend in a security or index is up or down. It cannot go beyond the two-probability plane. Now some of my tech friends would consider giving MOMENTUM an option but trust me that doesn't work.

The general trend indication would suffice as far as trading is concerned. Yet for the real value investments, one needs something that would guide him in order to recognize the POTENTIAL of the stock price. Now it gets very tricky there. Potential doesn't mean trend. Trends don't have anything to deal with potential. These are two different topics.

My attempt is to construct a system that would recognize potential of a signal (Any Signals say Moving average, Stochastic, and yes ROC) or the potential of stock price at a particular point in time. I have tried visual recognition methods and yes they work well. Head & Shoulder Pattern has particularly interested me but there is no way we can CODE it to my knowledge.

Now I need serious help from you guys to go ahead in this. I hope be we can break into something real good.

Please come out with maximum ideas possible.

Regards
Max

i'll send you some tips on this going forwards

I shall look forward to the same.

When you get the signal wait for the confirmation.

What are confirmation are we talking about here?

based on time, price or retracement?

Please throw some light on the same.

Max

hmmm...I have tried some things empirically and it seems that stocks that have fallen the most have the greatest potential when the trend is moving up again...

In fact I have tried a system which always picks the worst performing equities for the last 5 days in a market. This system has produced quite interesting and results, but also is very risky.

/Vlad

An interesting idea... bit insane... but interesting.

Yet what you are talking about here is Performance and not potential. Now there are good systems for performance but we are talking about potential of a stock here. Performance systems are one of those working fantastic but just buying the worst performer in a particular time frame may not be as a good idea as it sounds. Further, the reason why 5 day worst performers retrace back is because of cycles. So i would give a red to the idea of chosing the worst performers as a potential stock.

Seems that there are least people interested in this subject. Is it that way?

Regards
Max

You can recognize head & shoulders pattern by using minima and maxima methods.

You can take a small position when you suspect a trend change, and take more position when trend conclusively proved.

Would you please go into details of the same..

I think it will help me as well as the others.