Meta-Trader - How do you feel?

Welcome back Meta-Traders.

How do you feel today?  Or better yet, how do you feel about your investments today?  I ask because its very easy to get caught up in the feeling of whatever's going on in the market that day.

If we get a down day, its easy to find reasons for it.  An ongoing unresolved political situation in Greece, potential collapse of the Euro-Zone, financial contagion caused by the paralyzing inability of politicians and the public to take tough measures to deal with the situation.

And if we have an up day, then maybe its because the world's central banks are standing ready to take whatever steps are necessary to provide sufficient capital to prevent a run on the banks, the equity markets and risk assets in general.  Maybe its because stocks yield so much more than cash and most other fixed income, then of course it makes sense to be in equities.  Point is its easy to find reasons for whatever is happening in the market that day, but don't let that be your guide.

Instead, look at the behavior of your stocks across multiple time frames.  TC2000 makes it very easy to do just that as shown above.  The layout shows the % change for your stock for 1 day, 1 week, 3 months, and 1 year all in one quick and easy view.  Using that type of view, its much easier to ask yourself how you feel about your investments, because the screen is give you a full picture across several time frames.  How about a few examples using the above screen?

ETFC (E*Trade Financial) is down in every time frame from Daily through 1 year.  I don't feel so good about that stock and as a result, I don't own any.   Apple Computer (AAPL) is up a little today, but down from the prior week, up from 1 month ago, down from 3 months ago and up from a year ago.  I would say the picture AAPL is neutral.

Now take a look at Family Dollar (FDO).  Its up on every time frame and just made a breakout to an all-time high this past week.

Taking a look at the chart, its a thing of beauty.  Price bumps up against resistance at about $69-70 a share multiple times and fails every time. Finally stock puts in a Bull Elephant candle on 6/8 and makes its way about 70 but retreats and closes for below 70.  2 days later, stock tries again and gets to about 70.5 then pulls back with a "topping tail bar."  Next day stock gaps up and its off to the races.  I bought some FDO this past week along with some BLV that I posted about last week.

Another way to use this useful tool is to scale yourself in and out of positions.  For example, divide your position size into thirds and devote 1/3 to the weekly time frame, 1/3 to the one-month time frame, and 1/3 to the 1 year time frame. Go long when the stock turns positive for that time frame and exit when the stock turns negative for that time frame.  Using a method like that, you will be never be loaded up long when a stock is heading lower on all time frames. Follow logic like that (or make up your own) and you will out of stocks like ETFC to avoid the big losses and into stocks like FDO to cash in on the big wins.

No method is 100% of course and you could follow the above methodology and get whipsawed around and lose money.  And keep in mind a few important things:

• The short term indicators change the most often and therefore don't give them as much weight as the longer term indicators.
• The indicators will move from left to right over time so breakouts always start on the daily, then move to the weekly, then the monthly and so on.  And same thing in the way down with losses starting at the left and moving to the right.
• Know the underlying company, their business, their sector, their competition, their growth rate and price to earnings multiple and earnings dates of course.
• When all time frames line up, and all the other factors line up, and the stock makes a new all-time high as FDO did, spring into action and take a position.  

Not much positive happened in Forex this past week with every account headed lower.  Let's see what news we get from the election in Greece on Sunday 6/17/2012.

Happy Fathers day to all the dads out there, myself included.  Keep on fighting the good fight and have a great week.