Multiple Trading Strategies Based on Different Timeframes

Posted on March 16, 2011
Here at Stock Market Strategy we treat trading as a business and we would advise that you do the same. So, if you owned a business would you limit yourself to only having one product line? Product Line = Multiple Trading Strategies When starting out in business you decide to sell a certain type of product or service and be the best at delivering that product/service to the customers you acquire over time. The truth of the matter is that you soon realise that one product is sometimes not enough and can lead to limitations to your sales capabilities reducing your profitability. The first step is to start testing the market with new products and uplifting your services to your existing clients but finding new products that compliment existing ones. You can then test those products in the market environment. Trading the stock market bares all the same characteristics as a normal business. Your product lines are your trading strategies and even though having one successful trading strategy can be very rewarding, what happens when market conditions change and that strategy is in draw down? 1. You identify the condition and you move to the strategy that works in that market environment. 2. You have multiple strategies on different timeframes

The Pros and Cons to any Trading Strategies

There are pros and cons to both of these scenarios as sometimes a condition can change and you might identify it too late plus moving to another strategy might also be the wrong thing to do. That's where our technical analysis saves us. The second scenario has greater benefits due to the multiple time frames. For example one strategy can be adapted to multiple time frames with little or no adjustments but the cons are, the lower the timeframe the more market noise you will have to put up with. Multiple timeframe trading is a strategy we use at Stock Market Strategy and using multiple strategies on the different time frames is something we also do. But like with a normal business all our product lines have been tested in the market using a back testing model, paper traded (simulated trading software) and forward tested using cash. We use this business model of multiple timeframe trading strategies to give us more trading opportunities which really equates to more revenue streams from the product lines we have created.

Stock Market Recap

The SP-500 has not only had its own selling pressure from the last 3 week selloff but it has also had further selling pressure added due to the conflict in Libya and more recently with Japan. The unrest comes from the news surrounding all of the energy and production problems that manufacturers are having in the Automotive and IT sectors. All this had a significant effect on the markets around the world but the Japanese government did intervene with pumping in around $300bn to help stabilise the economy which seems to have worked short term with NIKKEI seeing +5.6% gains in its session. Yesterdays long range bar could be interpreted as a flush out bar from a technical point of view, but we really do need to see more evidence after over three weeks of selling pressure. It's time to start analysing some sectors that have been outperforming the market in these last few weeks and identify the strong stocks in those sectors. Remember our little saying - we like to look for buying opportunities when there is blood in the streets, or when everyone looks like they are running for the door we are there holding the door open for them! When we see these types of scenarios, we then come off the sidelines on our longer term trades to pick up some value!

Straight Talking Strategies

If you have any questions relating to this market update or wish for us to talk about a trading subject that you're interested in, please don't hesitate to contact us.