Tuesday, December 06, 2005

60 degrees eh?

I just read an article on exit strategy from TradingMarkets.com that was linked from the yahoo finance front page. The author has a nice quote at the beginning: "Let your SLOW MOVING winners ride, and cut your TOO FAST winners and all of your losers short." Ok, I'm with you. Sounds agreeable to me. So what's this exit strategy I came here to see? Here we go:

"When a stock is moving in your direction, "let it ride" if the angle of the trend is a 60 degree slope or lower, and exit into the sharp wave on big, sharp movements in your direction that look closer to 90 degree angles."

Wow, what a completely useless strategy. Did you know that the angle you see on your chart is completely dependent on the timeframe, how many bars you are viewing, and whatever cosmetic settings your chart software is using at that time? I knew this, but I'm sure there are plenty of people who didn't know any better and might actually try this one at home!

Is the ANGLE of this thing 70 degrees or 40 degrees?

Both charts are of the same publicly traded issue on the same date, just different timeframes and number of bars. So is it a sell or a hold according to the article's supposed exit strategy? The correct answer is to use a better exit strategy.


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