TMAMM Trade of The Day
The TradingMarkets strategy can be summed up in one key phrase
: Always Buy Low!
TradingMarkets has published its 10 Rules For Successful
Trading. Let’s take a look at a recent trade taken by TradingMarkets
Advanced Momentum Method (TMAMM) through the framework of the 10 Rules.
Due to certain restrictions, we cannot provide the precise TMAMM rules, but will
use the 10 Rules to frame a discussion around this specific trade.
Business Objects
(
BOBJ |
Quote |
Chart |
News |
PowerRating)
triggered a buy signal on 10/24 at the price of $33.55 and triggered a sell on
10/27 at $37.22 for a profit of $3.67, or 11%.
These buy and sell signals are based off of the proprietary
TMAMM system, but let’s take a look at the trade based on the 10 Rules For
Successful Trading. Rule #1 states "Buy new lows, not new highs." On
10/24 BOBJ was trading at a 14-trading day low, almost 3 full weeks.
Despite making new weekly lows, BOBJ was still above its 200-day SMA. Rule
#3 states "Buy stocks above their 200-day SMA." This is a stock that has
been trending strongly upward, but is experiencing a sudden, severe decline.
Rule #8 states "Learn how to properly use RSI." At TM we use 2-period RSI
because we have found the best short-term results with that time-frame.
Looking at the RSI 2 for BOBJ on 10/24, we see a closing reading of 0.55, an
extremely low reading for a stock trading above its 200-day moving average.
So what do all these rules add up to? We bought a strong
stock after it had declined significantly. We bought it after it had
declined EVEN FURTHER from the lows made on 10/23. Our research has shown
repeatedly that strong stocks perform better than the S&P on average after
experiencing a major decline.