How to find Stocks on Fire

[David Randolph]

To celebrate our 1000 member I'll disclose a part of the strategy that leads me to the 3 Stocks on Fire, so you can pick the parts that better fit your personal trading style.

It is a simple method indeed.

1 - You need to have the Equis Metastock software
2 - You need a database feeder to Metastock. I have Reuters Data Link (it is a pretty cheap feeder - only end of the day - you don't want intraday)
3 - On the Metastock software you have one function which is the «Explorer»

Inside the Explorer you need to follow the next steps:

1 - Choose the predefined «Equis - Volume above average» explorer
2 - Edit that predefined Explorer and make some changes: on COL D put "CLOSE", on COL E put "Ref(CLOSE,-1)" and on filter put "colA > colB AND colA > 10000 AND colD > colE AND CLOSE > OPEN AND V > Ref(V,-1)"

This means you want volume above the 50 day volume exponential moving average. You want stocks that went up the prior day. You look for stocks with at least 1,000,000 shares traded on the last session. Finally, the last day on the stock must have been white, i.e., close > open.

Applying this filter you throw away 95 to 99% of the 11000 or so stocks. But this still leaves you with 50 to 500 stocks to consider ... that's when art comes to play, and I can't teach you art 

I have about 150 stock market books in my shelves ... some of them (about 10) have thought me something about this business. Someday I'll tell you what those books are.

Good trading for all !

[rocket8]

dave you genius,  150 books.  damn.

Question #1:  how much of your stock picking is based upon charts and how much is based upon learning something about the company's business?

Question #2:  how about sending out an email telling us when to sell?  How do we know when to sell?

Question #3:  What does Fred do?  Do you discuss each pick with him?

Love your site.  Daniel

[bob839usa]

Weeeeellllll I will just keep reading your posts.  I dont use Metastock and I "KNOW" you will never give away the rest of the secret!!!!

[stocky]

Good job. I have a feeling though that you have learned more from your trades then putting all 150 books together. 

[rocket8]

HEY DAVE,  IS THAT ONE DAY UP OR 2 DAYS UP IN A ROW?

This means you want volume above the 50 day volume exponential moving average. You want stocks that went up the prior day. You look for stocks with at least 1,000,000 shares traded on the last session. Finally, the last day on the stock must have been white, i.e., close > open.

[David Randolph]

Question #1:  how much of your stock picking is based upon charts and how much is based upon learning something about the company's business?

Chart must be favorable or I won't even look at the stock. I don't want to be the first to see a good business, I wait for someone to see it first. This happens because I don't want to be the only one who sees a good business and no one else buys 

After exploring and filtering the entire database I get 50 or 100 stocks or so. Then I try to grasp the reason behind the move and that leads me to choose the best stocks from my analysis.

Question #2:  how about sending out an email telling us when to sell?  How do we know when to sell?

Good question. You see, now I analyze all holdings after the close or before the open and there I almost always tell what to do given any market circumstances. I say I'm going to sell before I actually do it, sometimes 10 hours or so before. For example, yesterday I've sold RMBS and BCGI. If you go check those posts I've said I would do it much before the open.

I review holdings answering the buying posts. When I sell I answer the buying post.

We're thinking of sending an e-mail for when to sell, but not immediately, maybe in the future ... altough I almost always say I'm going to sell much before I actually do it. Just pay attention to this board, please.

Question #3:  What does Fred do?  Do you discuss each pick with him?

Everyday me and Fred have lunch together. The picks we discuss at lunch are the better ones, when we get very excited about a stock or a story we have a good probability of a 100% move, or even a 10 bagger like happened with AMRE. Fred may choose some of the 3 stocks on fire but we don't trade as a team, I'm the sole responsable for the trades. Fred has the technical department of the website (man, I can't do websites) and he participates on other boards. We're a perfect team I believe.

Love your site.  Daniel

Thanks Daniel, I love it too 

Weeeeellllll I will just keep reading your posts.  I don't use Metastock and I "KNOW" you will never give away the rest of the secret!!!!

Thanks bob839usa, nice picture (I have to put one of me here). I will keep sharing my strategy with you fellows ...

Good job. I have a feeling though that you have learned more from your trades then putting all 150 books together.

I guess your feeling is right stocky. A wise man learns from his mistakes. A genius learns from someone else's mistakes. I know I ain't no genius, but I like to learn from others mistakes and successes. That's why I've read so many books, but like I said, the majority of them are worthless (you only know after you've read them).

HEY DAVE,  IS THAT ONE DAY UP OR 2 DAYS UP IN A ROW?

Just one day up, that's enough, given the other conditions. I forgot about another rule: volume must be higher than the volume on the prior day.

Thanks to all for your feedback !

[poiss]

David,

Q#1: What are Your basics for selling?
Q#2: Do You use STOP-LOSS orders?

BTW! Your page has taken 1.st place in my financial bookmarks in only 5 days.

[Ramsburg]

Question #3:  What does Fred do?  Do you discuss each pick with him?

Hi Rocket,

Like David Said... and by other words:
- Managing a Stock Portfolio is like Sailing...
You can have a good crew, but theres only one man in charge on board: The Captain !
And here, the Captain is David

Trust me (and I'm a sailor), if you have 2 captains on board, the boat is lost 

Me and David have learned together the «art» of speculation, we have the same educational background (we are best friends since highschool), and we passed by the same kind of experiences on this area, but David is the right guy for the job

All the trading decisions are made by him, and he have always the last word on it. I may suggest him some stocks, and we discuss a lot of trading ideas and strategies (specially at lunch), but he is the man in charge for our portfolio

best regards,

[boatguy]

Dave,

What are your top 3 book picks!!

My eyes will hurt if I read 150 to find the good ones.

I never really cared for message boards but you guys have a winner here.

Thanks

[Racer X]

Hi David,

Does the basic version of Metastock include the filters necessary to follow your method?  Also, like Boatguy, I'm curious about which books you felt were truly informative.  I've read three so far by different authors that have basically said the same thing.  I've learned just as much by following the boards here.  Thanks for a very educational site.

Racer X

[David Randolph]

David,
Q#1: What are Your basics for selling?
Q#2: Do You use STOP-LOSS orders?
BTW! Your page has taken 1.st place in my financial bookmarks in only 5 days.

A#1: Selling is much more difficult than buying, so this is a great question. I can't answer now, during the week I'll try to write a text where I will give some clues when it comes to selling stocks.
A#2: Sometimes, but I try not to. If I can't watch the markets (I don't like to sit around the computer all day watching the intraday quotes) and I'm focused on a particular level I may use stop loss orders. But it is rare because I don't like taking conclusions out of intraday data, I like to decide near the close of the session.

5 days and we're number 1 for you. I'm proud, thanks !

Dave,

What are your top 3 book picks!!
My eyes will hurt if I read 150 to find the good ones.
I never really cared for message boards but you guys have a winner here.

Thanks

3 top book picks ... that's a hard one boatguy ... let me see. Number one is easy: «Reminiscences of a Stock Operator, Edwin Lefèvre, 1923». Number two I'll give you «The Disciplined Trader, Mark Douglas» and number 3 a technical book, «Candlestick Charting Explained, by Gregory L. Morris», because I think you can't understand the psychology behind short term price moves if you don't know about the candlestick theory.

This is valuable information. It took me years to find out about these books. I hope you enjoy and value them.

Hi David,

Does the basic version of Metastock include the filters necessary to follow your method?  Also, like Boatguy, I'm curious about which books you felt were truly informative.  I've read three so far by different authors that have basically said the same thing.  I've learned just as much by following the boards here.  Thanks for a very educational site.

Racer X

You got the 3 books (but I got more that are very good and probably would deserve too to be on that 3 book short list).

Concerning Metastock I don't know what is the version you're talking about but even my version from 1999 had the tools needed to build my explorers and filters. If you need help doing this say something.

Have a nice day, see you fellows in action tomorrow !

[starfire]

Dave & FRederick,
just a suggestion. you may want to keep this thread displayed on the homepage as a 'fixture'. may get more hits. anyways i am learning!!

[REALDEALS21]

Hey, David, do you use eSignal or Datalink with the Metastock software ?

Also, do you have the 7.0 or higher version ?

Thanks !

[Thunderbunny]

David,

While the veteran traders will likely laugh at this question, I find myself often wondering what is the right number of shares to purchase in a trade. The obvious answer is that it depends on how much you want to or can risk. Sometimes even a dramatic move will yield negligible returns if you haven't purchased enough shares. Do you have a rule of thumb for how many shares to buy with each trade?

I apologize if you've discussed this in earlier posts, as I am relatively new to 3StocksOnFire (but am already thoroughly impressed)!

[TRUNK]

While the veteran traders will likely laugh at this question, I find myself often wondering what is the right number of shares to purchase in a trade. The obvious answer is that it depends on how much you want to or can risk. Sometimes even a dramatic move will yield negligible returns if you haven't purchased enough shares. Do you have a rule of thumb for how many shares to buy with each trade?

I'm not laughing at your question and I'm not a veteran trader, but I think I can answer the question sufficiently.. The amount of shares you hold is irrelevant.. Whether you own 1 share of Berkshire Hathaway or 192,000 shares of AMEP.OB (as I do) If either stock goes up 10% you make 10% on your investment regardless of how many shares you hold....

So you think the market would be all the much wiser to splits, reverse splits etc... Which attempt to make the stock more attractive to investors. However man is not fooling the market, he is fooling other men, which is easy.. fooling the market is impossible