Monday, April 27, 2015

More Good Stuff to Begin the Trading Week

*  Above we see a cumulative running total of the number of NYSE stocks giving buy versus sell signals with respect to their Bollinger Bands.  This is one way of looking at the breadth of strength versus weakness over time.  After notable weakness going into the October, 2014 drop, we have been working our way higher in this measure.  More stocks have been showing strength than weakness, as much because of the relative absence of sell signals as the high presence of buys.  

This is a very important concept for developing traders:  How we are wired socially, emotionally, and cognitively defines where we will find our edge in markets.  We are best positioned to know markets if we first know ourselves.

*  I've been making increasing use of the site.  I like the feature that tracks advancing and declining stocks across international as well as U.S. averages.  I also like the coverage of international markets, FX, and the international commentary.

Of the top posts tracked by Abnormal Returns this past week, I especially like the one that outlines problems that frequently accompany backtests.  Another great link is Meb Faber's post on diversification and protecting against an overvalued stock market.

Great series of posts on mindfulness in trading by SMB Training and Bruce Bower.  The clearest problems with mindfulness occur when we are caught up in emotional reactions to market action.  Less appreciated is that we can lose self-awareness as a function of good trading.  If we're absorbed in markets, we're not focused on our best trading of those.  It's that transition from market awareness to trading awareness that is key.  Many great traders use post-it notes for reminders on their screen precisely because it's when they're most focused on markets that they're least focused on best trading practices.    

*  Are we trending on a day time frame?  Stats provided by Vic Scherer are quite relevant.  I've also been looking at volume as a relevant measure.  It's tough for short-term moves to extend if volume is drying up.  Note that trend on an X time frame is dependent upon momentum at the Y time frame, where Y > X.  If you have a measure that has a momentum edge, you can generally define a winning trend strategy at a lower time frame.

Have a great start to the week!