Strategies and Guidelines

There are many ways in which Hotsignals.com can bring significant benefit to any traders arsenal. We recommend a simple strategy to follow in order to get yourself started. This key strategy is applicable to uptrend, consolidating and downtrend market conditions and should benefit both novice and experienced traders alike.

Important Understandings

Signal direction is color coded – downtrends signals are shown in Red, Uptrend signals are shown in Green. For further clarification see the Definitions / Glossary page.

The recommended strategy’s primary focus is selecting stocks where the sector and or Industry are in early stages of rotation to support the underlying stocks direction.

Key Favorite Strategy

Select the Predictions menu and choose favorites

Look at both Uptrend and Downtrend Signals and check for Sector and/or Industry reversals and these should then be your primary targets, the higher the HPA the more likely your success.

Examples:

Fig 1: Uptrend Signals showing Sector and Industry reversals.

Fig 2: Downtrend Signals showing Sector and Industry reversals.

When you see a counter weakness in the Sector and Industry we suggest adding these Symbols to your watch list and awaiting reversal indicators or if you see real weakness 1 bar or less then you may wish to be aggressive and take a position.

Another trading suggestion is to look for weaker signal strength on the stock but with strong sector strength in the same direction, as this has historically proven quite successful as these stocks seem more influenced by the sector momentum.

Recommended trading guidelines

When placing a trade we strongly recommend limiting your risk by using guaranteed stops^*, for uptrends take the low of the signal date and deduct the volatility, for downtrends take the high of the signal date and add the volatility.

We recommend an initial target of 5% and once this has been achieved we recommend closing 50% of your position and moving the remaining 50% to free trade status by setting the stop at your initial entry price. Choose your next target (i.e. 10% on initial signal price) and on reaching the target again close 50% of the remaining open position and move the stop loss to target 1. Continue with this process until either you reach an overall profit objective or your stop gets triggered.

We advise you record your trades in Hotsignals.com by adding them to your current holdings so that you can see the progress of our signals during their lifecycle and can watch for significant changes in supporting conditions such as the Industry or Sector positions, this helps determine your exit strategy. In addition it also provides you with the monthly gross position^** which can be logged against your corresponding financial goal.

Fig 3: Adding a stock to your Current Holdings, allowing progress of signal to be tracked.

If you have been in a trade for more than 8 trading days without hitting any significant price movement we suggest you consider closing the position and selecting fresh opportunities.

^*We recommend using guaranteed stops which normally attract a higher premium than normal stops, but give the added benefit or guaranteeing your limited risk, ask your broker for further advice

^** excluding commission costs

Advanced Strategies

If you are an experienced trader and would like more freedom to explore the boundaries of our favorites then you may wish to use the two other levels of predictions which we provide (Alerts & Confirmations). Here we have relaxed certain conditions used to generate our favorite strategy.

Confirmations are normally the safer and more conservative signals to pursue, but for the aggressive Traders who are seeking earlier indicators we have included the Alerts, these potentially can yield a greater return but have a higher inherited risk and should be treated with extra caution. We strongly recommend seeking further confirmation from your brokers or financial advisor.