SATS5 Expert System Introduction

SATS5 Intro - NEXT

A great majority of private investors are trading based on fundamental analysis. They are long term investors buying stocks that are kept in portfolio for the long term. The idea behind is that in the long run the stock market is basically rising. So, they are trying to be as profitable as the stock index or even a bit better and of course more profitable than a no risk savings account. With this kind of investing the money must be spread among a bigger number of different stocks and sectors. That way a bigger loss in one stock can be compensated with higher profits in another one. This means that there must be sufficient starting capital and that it must be reserved for long term investing only. A big disadvantage is the difficulty to define rules when to close a trade, because generally fundamental data is lagging considerably. Looking for an alternative based on technical analysis techniques, I developed SATS5 “Stocks Automatic Trading System5”. It may help to develop your own ideas. Please note the formula for SATS5 and some indicators are proprietary and not available. I am just applying them myself gathering real time experience. I am showing it now so there will be real time history when it becomes available. However, the next step is not decided yet.

 

 

Using technical analysis I believe there are two different approaches to look for buy and sell signals.

The first method is the method I used and explained in my book “Capturing Profit with Technical Analysis” (MarketPlace Books). The method explained in the book, called “LOCKIT” uses all possible technical analysis techniques to come up with reliable buy and sell signals. This is not an easy method, because you need a very broad knowledge of all the basic techniques and know how to apply them successfully.

A second method is to trail the price movement of a stock, buying and selling based on the fact that a short or medium term up or downtrend is broken, signaling a trend reversal. Here you have to find the most profitable balance between fast entering a trade avoiding as much as possible false entries and staying in as long as possible to let profits run. SATS5 is designed for this task.

  

It should be clear that this kind of trading can only be profitable if the stock makes big enough price moves. A stock making only small moves over longer periods of time will not make you money. Therefore it is very important to make a selection of stocks that make regular larger moves over longer time periods. Later on I will give you some simple method to look for the right kind of stocks to be used with SATS5.

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For a successful application of SATS5 it must be applied as outlined here concerning:

• Money management: the basic money management method applied with SATS5 is to use a limited selection of stocks (5 to 25) and to distribute the available capital between these stocks. Each stock will be traded individually with no profit or loss sharing with the other stocks in portfolio. This means that you must make a limited selection of stocks beforehand.

• Stock selection: use stocks that have a history of bigger price moves over a longer period of time and avoid to use stocks that have a history of:

• Little price change over a longer period of time
• Very high intraday volatility
• Very high daily volatility
• Regular big surprise moves

• Charting: Keep a chart, with the special indicators that come with SATS5 for each of the stocks selected to maintain historical comments, trend lines etc on each chart.

• SATS5 is not perfect: Keeping in mind that there is no perfect always winning system in the world, you have the possibility to decide for each SATS5 buying or selling signal to open or close that particular trade or not. Later on I will explain some simple technical rules and some special indicators that will help you making this decision. That way you can make even more profit compared to the full automatic trading based on the SATS5 expert advisor. Please note I will not include a description of the techniques used.
  
  For all the basic techniques, please consult my book “Capturing Profit with Technical Analysis”, published by MarketPlace Books and available HERE

SATS5 is an expert advisor for MetaStock® to trade stocks and an EA for MetaTrader4 specifically for the EUR/USD FOREX currency pair. MetaStock® SATS5 creates most efficient buy and sell signals on monthly, weekly and daily stock charts.

SATS5 Intro - NEXT

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