A Simple Long-Term Trading Plan (by Biffermas)

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What’s the appropriate answer to this question?


“Hey, you’re really into investing, aren’t you?  My broker stinks and I’m thinking about taking control of my retirement account.  Can you teach me this?”


In the last several months three separate non-trading friends have approached me with the same question.  I really didn’t have a good answer for them beyond, “Uhhhh”  (and secretly, “Grooooaaaaan”).  I hate giving investment advice for obvious reasons:  the process is fraught with peril and the motivations / expectations of those who ask is unclear.


I’ve given the matter much thought, and I’ve transformed my own long-term trading plan into a simple system that many people can use.  It has the following advantages:


1.       It gives clear, objective signals.

2.       It outperforms the broad markets.

3.       It keeps you on the right side of momentum for the majority of moves.

4.       It provides the signals for taking partial-profits, hedging, and putting additional capital to work.


This system has three levels.  Permanent links for these charts are here, here, and here.


Big Picture View:  13/34 EMA Weekly Crossover.  The parameters are simple: Go long when the 13 is more enthusiastic than the 34, and reverse to short when a bearish cross occurs.  This very seldom generates signals, and they tend to remain patent for years.   According to the plan, this chart alone dictates major portfolio positions and should not be gamed / faded.



Long term final
 

 

Intermediate View:  The Ratio Adjusted NYSE Summation Index.  This one I learned from somebody on the Slope forum (I don’t remember who!).  This provides excellent signals and serves as the framework for hedging, profit taking, and putting additional capital to work.   Although a wonderful “tell” of short to intermediate-term directional change the timing can be fuzzy by 1-2 weeks and requires a third signal before acting.



Intermed final
 

 

Short term view:  Daily 3/10 EMA crossover.  This is merely used to confirm the intermediate view and serves as the trigger for entry.   Both higher time frames *must* be in agreement first.




Short term final
 

One additional level you can add is a 3/10 EMA crossover on a 60-minute chart, located here With all four in agreement, it's a very good way of stacking the odds in your favor.


All four have triggered long signals as of Friday's close, and barring a hideous gap Monday morning, I'm putting money to work!  Remember to use stops!  I'm placing mine underneath Friday's low.

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