Hello, as a new member to SPA3 Investor system, I have a question on entry signals.
- When starting a new portfolio, which one is a stronger signal, ATR BO or BAP?
- Is relative strength as % ranking a better indicator in choosing a new candidate, if there are multiple BO or BAP signals?
I, too, am a new member and am very much “feeling my way”. I’ve preferred ATR BO to date as the stocks associated with the BAP have obviously gone south a little since being alerted. Whilst the plus side of buying a BAP is that the entry price is a little lower, there is more chance that the stock will become a “Sell” before too long.
The relative strength % is a “noisy indicator” as it bounces around a lot, as it uses the price a certain period ago for comparison. I haven’t investigated too much but a “smoother” indicator like ADX (strength of trend) might be another option to consider. Only having bought a few stocks to date through SPA3 Investor, I’ve tried to mix up the sectors.
As mentioned, still on my “L- Plates”, so any constructive comments or advice appreciated.
Over the longer term, it matters little. More importantly, it is the method you choose and document in your Investment Plan that matters more. This should ensure that you are consistent with each signal and don’t jump from one to the other at the time of action.
In my case, I chose to delete a couple of stocks I did not want to own, I limited the amount of banks I can have in each portfolio I have, I chose to buy BAP
I try to avoid doing too much ‘fine tuning’ when buying. If I get a ‘buy’ signal, that’s what I do. I don’t rush to fill all positions in a short time, even if I have a number of positions available. Generally, the SPA3 Investor system produces investments that are held for a number of months. Holdings held for only a short time are generally the ones that arise from selling out on ‘buy’ signals that have turned down, usually resulting in a comparatively small percentage loss (the SPA3 Investor signals don’t always produce ‘winners’)…
If a holding is held for a number of months it will generally be one that produces double digit returns, so there is no point trying to gain every cent in getting the best ‘buy’ price.
Often, a higher ranked share will be one that has risen above its original ‘buy’ (action) price so it could be susceptible to a greater loss when the eventual ‘sell’ signal comes (unless it continues its already established upward trend) if that happens soon after your purchase. Its ranking is probably high because it has already made a significant gain.
Similarly, a share bought at ‘BAP’ may be below its action price because its trend has already indicated a downturn.
Having said all of the above, there have been times when I have bought a high ranking share and also ones which have been ‘BAP’, when I have had an ‘empty spot’ in my portfolio. But if I had multiple available spots, I wouldn’t be in a hurry to fill them all. Without making a completely mathematical rule, I would have most of my holdings bought using SPA3 Investor ‘buy’ signals. After a ‘sell’ and therefore having a ‘spare spot’, I might purchase either a high ranking or a ‘BAP’ share, but would avoid having many such purchases in my portfolio, and would prefer to wait for a ‘standard’ buy signal.
Keep it simple and focus on just buying when there is a standard ‘buy’ signal. Don’t hold too many which have already completed a noticeable rise (probably a high ranked share) or have begun a downtrend (likely now a ‘BAP’ share).
Hope that helps,
(hit wrong button) and closest to 2% or less of the ATR stop, first, then buy signals with greatest Relative Strength, then by the greatest expectancy (in statistics by the traffic light button on Portfolio Manager) if there are more than 1 choice with similar Relative Strength. These are not recommendations, rather just a pathway that is defined to make the choice mechanical. I could have chosen a dart board and it would be just as valid.