Wednesday, January 26, 2011

Combining indicators for buy/sell signals

Many people look at multiple indicators to try and determine entry/exit points for trading stocks.  I often see references to RSI/MACD and divergences, etc.  But I have never seen a set of rules as what exactly is a buy signal or a sell signal using these multiple indicators.  It seems to be more intuitive than rule based.

Now it seems to me if we are going to use these indicators we ought to have a set of rules as to what is a "buy" signal and what is a "sell" signal.  As you may have noticed I use CCI on most of my charts and indicate when it is issuing a buy signal or sell signal.  I recently introduced the MFI as another indicator that may be useful in determining a "buy" or "sell" signal.

So what if we combine the two and lay out a set of rules for their use?  I have tried to do this.  Understand I have not tested this over long time frames (a variety of market conditions) nor a large number of stocks. So it may need some refining over time.  It seems to work on a variety of stocks though.

You can help me road test this?  Here is how it works:




Try this out on some of your favorite stocks and let me know if you see problems with it.  Your help, comments and feedback will be greatly appreciated.  Oh, you want to know what the stock is an see how well it worked?   It is a stock I have posted about previously here on this blog.  But if you really want to know what the stock is check back tomorrow night or Friday morning and it will be posted.   :)

GL traders.  Enjoy the home brew.

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