Trendseekers! SRB


	DDCA SRB

Dynamic Dollar Cost Averaging - Stochastic, RSI, Bollinger bands
Or you can just call it..... "SRB".
This method, which is really chart aided DDCA (or AIM) which buys and sells price swings and levels. The buys and sell are triggered by the Stochastic indicator. The amount that is bought and sold (small, med or large) is governed by three conditions:
1. The stochastic indicator.
2. The Relative Strength Indicator.
3. Bollinger bands.

If no.1 is met then at least a small transaction is called for.
If no. 1 and 2 or 1 and 3 are met then a medium transaction is indicated.
If all 3 are hitting at the same time a large Buy or sell can be done.

It's not "automatic" like regular DDCA or AIM and a little interpretation and practice is required but it's very easy to do and anyone who uses it will end up with different results but I believe the results will be well worth the effort! I have found that DDCA handles the out of cash problem that AIM is hampered with. While DDCA AND DDCA-SRB can run out of cash it seems to do so less often and less severely. But if an individual using SRB makes bad choices he could easily run out of cash with SRB as well.
The reason SRB works so well is that when the stochastic gives a signal it does it at it's extreme price swings and if the RSI is at an extreme level all the better while the Bollinger Bands give a clue where and or when to act. Also, though SRB is incorporated like AIM it's done without Port Control or SAFE. The buys and sells are a percentage of The Portfolio Total instead.

I offer this trading system to the world. I am not out to make money from this project. I also encourage others to add there input and strive to improve it and make this a boon to mankind as I believe it will. If for some reason someone wants to capitalize from it by selling it I would demand a cut .

On with the show, The concept:

	Looking at XMSR you can see the Slow Stochastic indicator (the one at the top) is swinging back and forth as the stock goes through it's gyrations. I have set the moving average of the Slow Stochastic indicator to 4 (the red line on the Slow STO) This can aid in the timing of buying and selling. When the STO crosses down under the 20 (buy zone) or above 80 (sell zone) it's time to sit up and take notice. A buy or sell is in the offing! This is the key indicator. When the STO is between 20 and 80 do nothing! There are exceptions to this rule but rarely. Here's an exception: At the almost-sell-sig in early Nov. Because the stock rallied so much and exceeded the top Bollinger band that would have prompted a possible sell. Even though the Stochastic did not enter the sell zone, when the price breaks the Bollinger band (upper or lower) it might be time to act. In this case it was quite clear but it may not always be so clear. This would have been a "small sell" because all the conditions were not met for a "large" or even a "medium" sell. Rules are sometimes meant to be broken, it's up to you. You can see that quite a few buys and sells were given in this rel short time. This number of trades might not be your cup of tea but then again it's not really much more than a reg monthly AIM or DDCA would potentially give.

Below the stochastic indicator is the RSI. When the RSI is at or above or even near it's upper line at 70 then it's telling you the time is ripe to sell. It's really the best time to sell. Conversely when it's down around 30 it's best to buy. The level of the RSI is one of three conditions that determines how much to buy and sell.

The 3rd element are the Bollinger Bands. These are great! I do not use them in the traditional manner, (although I leave the default settings alone) but rather just as a guide to the "best" level to Buy or Sell.

These charts are taken from stockcharts.com and though other charts could be used I have not tested them and don't know if they use the same settings.

So, basically it's this:
Stochastic tells you when to act.
RSI tells you how much to buy or sell.
Bollinger Bands tells you where to buy or sell.

Slow Stochastic:

Here is an idealized example of what denotes a sell signal. When the Slow Stochastic is above 80 and it crosses the red line, that is a suggested sell. When below 20 and crosses, suggested buy!
Like all things in life it's not quite that simple or as well defined but with practice you can do very well. As a matter of fact you do not need to sell or buy when the black crosses the red and sometimes you won't want to buy or sell at all when you get a signal and that's why I said suggested buy or sell. More on this later.

Relative Strength Index: RSI:

Shown here is a snip of the RSI from a stockcharts.com chart. When it goes below or above or even near 30 or 70, that's normally a good time to place an order.

Here are the Bollinger bands. The two blue lines above and below the price bars. The dashed line in the center is a 20 day simple ma that is part of the Bollinger bands set up. I don't use this ma other than reference. The red line is a 200 day simple MA. Now and then it comes into play. The Bollinger bands are set to the default value of 20-2. The Bollinger bands are very useful in SRB. As you will see.

So, for this to work you need a stock chart and DDCA and some money!

Like AIM we start with approx 50/50 split between stock and cash of hopefully a relatively high beta stock. We also would like a cyclical stock if possible. We would like a sound company that is not in financial trouble since we want it to be around awhile. If we were smart we would do a DDCA of the stock in question on past data to see what to expect from this stock. I have found that a Small buy or sell would be 80% of the percentage change from the last transaction. A medium buy or sell would be what ever percentage change had occurred and a large would be 1.2 times the percentage change, that is:

If the stock went up 10% from the last buy or sell and it was a small transaction it would be: 10% x 0.8 or 8%.
A medium transaction would be the full 10% and a large would be 10% x 1.2 or 12%. These numbers seem to work but might not work in all cases. To avoid running out of money or shares you may have to adjust the percentages.

The basic system. I will take you through these examples and the prices you want to buy and sell at will be plugged into DDCA or AIM as optimum levels and DDCA or AIM will tell you how much to buy or sell. Perhaps a Small medium or large transaction could be the SAFE settings in AIM you might go: Small = 10% Med=5% and Large=0% for SAFE. I haven't tested this theory but it might be the cats PJ's. If your not familiar with DDCA or AIM then read up on them first.

Once again, let's look at XMSR. On this chart there are several buy and sells.

In early Oct. a big buy around $3.00 and in late Oct. a min buy at $2.90 but then again maybe not worth buying at all since it's not much below the previous buy But if you missed the first buy this is your lucky break.

A few days later (early Nov.) a med sell around $3.80! When the price hovers around the upper Bollinger Band and the Stochastic is near the sell line then it's time to act even though it's not an all out sell signal but close enough.

Down we go to under $2.00. Now this is a big buy because all indicators are in concert. You may have been tempted to buy just above $2.00 as well, thinking it was time to act and who could blame you. It's a judgement call.

Early Dec. up we go! And though all 3 were not set for a big sell don't let that stop you.

The next buy in the new year was a wimpy one but a buy never the less. And if you could have bought it around the lower Bollinger Band you would have bought at a good price.

Continued: (Same chart)

The next rise was up to $5.00 in Jan. All 3 indicators were poping and the 200 day MA was tested. This is a good level to shoot for or to identify as an important milestone in the price movement. See how it affected the price for several weeks after.
By the way, You can ignore the 200 day MA if you like. I just point it out as something affecting the prices in many cases. One thing to remember is this: In most cases, if the price gets a long way away from the 200 day MA it always returns to it sooner or later. If sooner, then to the level the MA is at now (roughly), if later then at a lower or higher level. Keep that in mind, it will add to your pocket book immensely.

Early Feb. a buy of a wimpy sort but still legit. Again if you could get in your buy near the Lower Bollinger Band all the better. That would be a medium buy.

Next, back to the 200 day MA for a small sell in mid Feb.

The next buy signal in early Mar. On the 200 day MA may or may not have been worth bothering with since it may have been to close to your last sell. It's up to you

Finally one or two more sells in late Mar. A big sell since all 3 indicators were in sync.

Notes:

Use daily stocks from stockcharts.com. Recommended.
Consider buying when STO goes below 20 and then crosses back above 20 even without crossing it's 4 day ma (all in a very short time.)
Consider selling when STO goes above 80 and then crosses back below 80 even without crossing it's 4 day ma (all in a very short time.)
If prices rise to the point of exhausting most of your shares by consecutive selling consider leaving this issue and starting two or more new stocks from the proceeds. If the stock continues to rise you might not get any usable leverage from the current stock because of your very low share holding.
Use the spreadsheet to do a years worth of swings to optimize buying and selling amounts. You could do this without a spread sheet too by observing after a year of data how much cash was used or how efficient was the use of selling to get a good yield from this stock.
Use common sense when buying and selling. Doing a whole lot of buying when prices haven't moved much will exhaust your cash too soon as well as on the sell side. Get used to the stocks tendencies by looking at past chart data.
Taxes: If you are not using a tax sheltered account like a 401K, IRA or Roth IRA taxes might be an issue to you. I suppose all gains / losses will be short term for the most part. Try using a Roth IRA or some form of tax deferred plan. However going short is impossible as far as I know in IRA accounts. I did not consider going short with this plan. The amount of buys and sells are not much worse than AIM BTB. You may try setting a min buy/sell % as a noise filter and only act on the bigger moves.
Commissions: These will have an impact on your account if you pay too much. I would consider anything over $15 as too much these days. I have run tests using $15 and it doesn't diminish returns by much.

I will add more information as time goes by.

I am sure some of you will have questions and or comments. If you do you can post them on the AIM RE-bal Discussion Board or you can email me at jibes2@yahoo.com