Trade for a living, using stock trading signals

What are stock trading signals? The answer will depend on who you ask.

For example, wool-stained opponents might believe that a stock trade signal to sell stocks could be when Time magazine publishes a picture of a bull on its cover. A wool-dyed technical analyst, on the other hand, can look up certain stochastic numbers on a 30-minute bar chart to indicate when to buy a certain stock. And finally a dyeing in the ‘fundamental’ wool # 39; Certain financial numbers of the underlying business may be considered by the investor as a trading signal.

So to this mix, let me add what I think is a true and useful definition of a stock trading signal. Let me give you an example of the type of signal I like.

Take an inventory and look at all the daily bars for the last 10 days. Then subtract all the highs from all the lows to get all the daily ranges for each of the 10 daily bars and then calculate the average range for those ten days. Let’s call this AVERAGE DAILY RANGE. Then divide each daily range by two to get the midpoint of each day. Now find the average midpoint for the 10 days. Let’s call this MIDDLE POINT. Next, take 125% of the AVERAGE DAILY RANGE and add it to the AVERAGE MIDDLE POINT and that becomes our trading signal to buy tomorrow.

Therefore, we have created a signal using only two parameters, AVERAGE DAILY RANGE and AVERAGE MIDPOINT.

There are many ways to get out of this trade, but again we want to keep it simple and limit our parameters. For example, we may want to put a stop loss on the low average and make a profit on the high average plus 150% of the AVERAGE DAILY RANGE.

In any case, I have created trading signals from the simplest ideas of market momentum theory and using the most limited number of parameters. And for this reason, this little trading system will likely dominate the randomness of short-term stock market movements and will likely generate some money.

But in this article I am not trying to design a trading system. What I want to do here is simply demonstrate my ideas about what constitutes a valid trade signal. In my opinion, a stock trading signal should include the following:

1) A stock signal must be mathematical and accurate in nature.
2) A stock signal must be programmable on a computer so that the computer and not the trader can track relevant markets and alert the trader when the trading signal has been reached. This allows the trader to diversify and trade many markets simultaneously.
3) Finally, the commercial signal must be of such a nature that it can be tested in all types of markets and in all types of market environments to establish its precision and validity.

Used in this way, objective stock trading signals form the backbone of our trading system development and become indispensable tools for profitable stock trading.

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