In the past few months, we’ve introduced many new concepts in TradeStops. Many of these can seem overwhelming at first. Are they right for you?
During the last part of 2016 and the beginning of 2017, the TradeStops research team has expanded its effort under TradeSmith’s direction to understand how the Volatility Quotient (VQ) can be used as the basis for different investment strategies.
We’ve written about Going Green and the importance of waiting for a Stock State Indicator (SSI) Entry signal and investing when a stock is in the SSI Green zone.
We told you about how following the SSI change from the Red zone to the Green zone can allow you to Capture Crazy Gains.
TradeSmith tackled the question everyone wants to know of How Much Can I Gain when investing in a stock.
We introduced the 2 VQ concept when talked about Doubling Up on Your Winners.
We also used the long-term changes in historical VQ to talk about Stock Picking on Steroids.
You can scroll through the TradeStops Blog to find more articles highlighting the different ways you can use the VQ to help with your trading.
It’s important to understand that none of the strategies we’ve introduced are meant to replace the historically-proven, conservative stock and portfolio management systems developed by TradeSmith and the TradeStops team.
We realize that every investor is unique with different goals and risk tolerances. Many of our TradeStops members have different goals depending on whether a portfolio is in an IRA or if it’s taxable.
Some members like to take higher risks than others (the 2 VQ strategy is perfect for them). Others are focused on stocks and funds that generate a high level of income.
Here’s a good example as to how investors with different goals might use a strategy we talked about earlier in the week.
In TradeSmith’s editorial Pruning Portfolio Weeds, he presented a chart that shows the average length of time it takes for a stock to move higher by 1 VQ.
And we showed you an example of this with the stock of Apple Inc (AAPL). The gray lines show you how long it took in terms of months to move higher by 1 VQ.
Most people buy AAPL for the potential capital appreciation that AAPL offers. AAPL does pay a good dividend, but most people think of it as a growth stock.
We mentioned that if a stock hasn’t increased by 1 VQ after 15 months, it might be a good idea to find a different stock. This is a way to “prune the weeds” as TradeSmith likes to say.
But if you’re an investor who buys a stock for its income, you might not want to sell the stock if it hasn’t moved higher by 1 VQ. Maybe your only concern is the dividend that the stock pays on a monthly or quarterly basis. If that’s the case, you probably won’t care that the stock doesn’t move 1 VQ higher within 15 months.
We’ll continue our research to find new ways to have better control over your stocks and portfolios. As an independent investor, you should look at your holdings to determine which of these new strategies might work well for you.
A suggestion that we make frequently is to set up some “Watch” portfolios so you can understand how to apply these strategies before you put money into them.
And if you need some help, send an email to [email protected] and we’ll be sure to answer your questions.
Education Director, TradeStops