MAKE SURE YOU HAVE READ THIS FIRST --> | PART-1 OF SHARETRADER USER-GUIDE |

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>>>THIS IS TUTORIAL #2 (ADVANCED FEATURES) <<<


After 3 months of operation and live field trades, and after consultation with our trading clients, we have launched new sophisticated automation features to JSW and its ShareTrader components.  Many of these new tools can be seen in the PowerTRADE introduction video and the ShareTrader training video, but we will discuss them here as well.

New features in the trading charts module, are numbered 0 to 9 below:


1. PORTFOLIO AUTOMATION (item-1)
This allows you to add, tag and remove individual shares from your personal portfolio file without having to open and manage the JSW_MYSHARES file. You can add, tag and remove shares by clicking on the "1", "2", "3", and "-" buttons to the right of the DONCHIAN chart. We use "1" to tag shares as investment (long term) stock, and "2" to tag shares as recently bought or trading stock. You can use "3" for anything you want.

Once a share has been tagged, its tag will appear at the end of the share's name in square brackets. You can see below that ARM is tagged "[1]" telling you its an investment share in your portfolio.


Remove a share from your portfolio by clicking the "-" button below the "1","2", and "3" tag buttons. Click on the suitcase button to load your whole portfolio (all shares tagged 1,2 or 3) into the chart viewer, overwriting all existing shares loaded into the viewer.

You can also enter a short comment for the share being displayed (it doesn't have to be in your portfolio) in the area marked "6" shown in the chart at the top of this page. Click on the black speech bubble to save the comment to your JSW_MYSHARES file. Comments saved for shares will be displayed above their TREND CHART as shown in area "6" below:

To clear a comment from a share you must just enter and save a new BLANK comment.

2. GROUP CHARTING AND NAVIGATION (items 2 and 3)
If you click on the black suitcase it will load your entire portfolio into the charting module so you can flick among your shares to see whats happening with them. The amount of shares loaded into the viewer, together with which share you are viewing will be shown in the box marked "3".

You can use the green left and right arrows (marked "2") to navigate left and right through the charts and the black navigation buttons to rewind to 1st share or fast-forward to last share.

In addition, if you run an automated screening or filtering function in the watchlist, or perform your own manual filtering, then you can load all the shares being displayed by the watchlist into the chart viewer by clicking the group charts button in the watchlist, which is the black button with all the faces on it, right next to the yellow SELL button.

You can also click on the brown "MyShares" button in the watchlist to only show shares from your personal portfolio in the watchlist.

3. ENHANCED INDIVIDUAL CHART LOADING
If you click on a individual share's "Tickr" (i.e its 3-code JSE name shown below) in the watchlist sheet, and then go and click the black individual chart button, to the right of the group chart button, then you will be taken straight to the chart viewer which will be preloaded with the share you selected.


You can also select any JSE share to be charted from the drop down chart button in the chart viewer:


4. CORRELATION AND RELATIVE STRENGTH COMPARISONS
You can select a comparison share (shown in "4" below) against which you can compare the share being currently shown on the chart (3)

The number in the green CORRELATION arrow marked "0" gives the 60-day statistical correlation between the share being charted (SANTAM in this case) and the comparator share (SATRIX-40 in this case). The chart tagged "5" shows the relative strength of the charted share to the comparator share. If it is rising it means SANTAM is outperforming SATRIX-40. If it is falling it means SANTAM is under-performing SATRIX-40. This is useful for comparing one share to another, and the SATRIX-40 is useful as a comparator share if you want to see how the share is performing relative to the JSE.

The comparator share will be superimposed on the background to the charted share, in the TREND chart to allow for visual comparison of their relative movements to one another. The comparator share is shown in "1" below in a light faded line.


5. BUY-POINT, STOP-LEVEL  MANAGEMENT AND PROFIT TRACKING (refer to above chart)
Enter price in cents you paid for the share in "2".
Enter the date you acquired the share in "3" in dd/mm/yyyy format (20/10/2010).
Enter the stop system you will be using for your trade in "4" (either 5,10,20 or 40-day support levels).
Click on "5" to SAVE this information in your JSW_MYSHARES file.

You can change any one of the individual fields in "2","3","4" above and click the SAVE button if you just want to change that one field, without overwriting the information already in the other fields.

If you click the "-" button to remove a share from your portfolio, it will CLEAR all these fields.

For any share you are currently viewing, its  purchase price and stop information (if any) will be displayed in the two fields just below the "6" in the above chart.

The current profit/loss on your trade (if any) is displayed in "7".

The point at which you bought a share is shown by a large green circle with a B as shown in the below chart, provided it was purchased within the last 60 trading days (12 weeks or 84 calendar days)


If the share has fallen below the stop-level you configured for it, it will be shown with a bright red arrow as shown in "9" above and a big red SELL! signal will be flashed across the top of the chart. You are NOT advised to sell at this point. You must now log onto your online broker and see if the share merely set a new support level (as the breach of support occurred yesterday) and is trading UP at this moment. If it is trading up it means it set a new support and bounced off it and you can let it run on the new lower support as trailing stop. If however the share is down for a 2nd consecutive day you must then DISPOSE of it and CLOSE THE TRADE.

The red dotted line "6" in the above live trade we conducted, depicts the 5-day support trailing stop level we used in the trade. Use 5-day support for your trailing stop when you initiate the trade and then once the share is in the green (you are in 2-3% profit) you may consider changing the stop to a 10-day support (the darker black line below the red dotted line) for a more medium-term trade or 20-day for a long-term trade. The lines shown with "7" are for 40-day support and resistance levels to cater for investors or very-long-term traders. Trades that sell on breaches of the 5 and 10-day support stops are SHORT TERM trades, and those on 20-day are medium-term trades.

The little markers shown in "8" show our Sincerity (green tick) and Trend Reversal (yellow exclamation mark) historical BUY signals. You can see above that you were presented with TWO opportunities to get into the NAMPAK trade. Aggressive traders might have PYRAMIDED UP their trades on observation of the 2nd set of BUY signals midway through the trade.

If the buy-signal markers are cluttering up your chart, you can toggle them on and off with the button marked "4" (an on/off switch icon) in the previous picture.

6. ONE-CLICK PORTFOLIO SELL ALERTS

The yellow SELL! button next to the brown MyShares button shows all shares that are tagged with a "2" (your trading stock or recently acquired shares) in your JSW_MYSHARES file, that have broken through their 5-day support.

Shares that have broken through their 5-day support levels have red down arrows in their Donchian "5" column. If there are also red down arrows in the "10" or "20" columns it means the share has broken under the 10 and 20-day support levels respectively (more bearish than the 5-day).

Now just because a share broke under its 5-day support DOESN'T necessarily mean you must sell the share. You may be tracking a 10-day trailing stop for example, or running a medium term trade with a 20-day stop. But we feel that any time any of your trading stock goes below 5-day support you need to know about it and at least look at its chart. Besides, well chosen trades rarely break under their 5-day stops so even with a 25-share portfolio, we rarely find this list more then 5 shares long, except of course if a correction is underway in the market.

Once you clicked the yellow SELL button you are thus advised to click on the group-charts viewer to load all these "SELL" candidates from your portfolio into the chart viewer. The big red SELL! banner will only appear on the top of the chart if the share has broken under YOUR SPECIFIC configured stop. So when you are in the chart viewer and you see the big red SELL! alarm, then you know some action is required - namely check your broker if the share has rebounded (in which case you give it a stay of execution) or get rid of the share by selling it and clicking the "-" button to remove it from your portfolio file.

7. MARKET SAFETY INDICATOR
The date area within the watchlist is shaded RED (Dangerous), Orange (Caution), Light Green (optimistically cautious) and Dark Green (Bullish) depending on various of our quantitative models that are constantly gauging the health of the JSE. It depicts the worst (RED) and best (GREEN) times to be conducting equities trading operations.


8. AUTOMATED MONEY MANAGEMENT [The most important thing you will ever learn from us]
This is one of the most critical areas in trading where beginners make the biggest mistakes (or fail to implement all-together). Money management ensures you do not risk more than a certain percentage of your trading capital on any one trade and also SIZES the trade appropriately for you depending on the volatility and support levels of the target share. These two combined equals RISK MANAGEMENT.

The money manager will automatically SCALE-BACK or EXPAND exposure of your trading capital depending on conditions reflected in the Market Safety Indicator. This allows you to reduce risk exposure during dangerous times (such as when the JSE is peaking out or over-extended) and expand your risk appetite during very bullish periods (such as when the JSE is making a bottom or trough reversal, or we have witnessed rare breadth thrusts).

To implement money management properly, you first need to open the JSW_MYSHARES file in the C:\POWERSTOCKS folder and set your trading capital amount, your maximum risk per trade (1-2% is recommended), your slippage allowance (0.5-1% recommended) and your brokerage rate from your broker.


Slippage is an allowance we make for bid-to-ask spreads or the share overshooting your stop level (or both!) It is a safety net, but cannot protect you if the share falls 3 or 4% in a day for some reason, or if you can't find buyers for your shares when you need to offload. Generally speaking, the larger and more liquid the shares you trade in, the less likely that the slippage safety net will be inadequate. Small cap shares suffer from large bid/ask spreads and can sometimes crash through stop levels with large moves,since their individual movements can be much larger than more liquid highly traded shares.

If you trade with limited capital, say less than R50,000 then you may find you need to accept higher trade risk (say 2%) to make your trades large enough to not be consuming too much in commissions/brokerage. At a minimum fee of say R100, and a 0.5% brokerage rate, the optimum trade size is about R15,000 - R20,000 to ensure brokerage does not consume too much of the trade to make it worthwhile.

On a nice bullish up-leg, you can expect to make between 5 and 7% average gain on a good short-term trade, so if you only trade R5,000 then the R200 brokerage (for buy and sell) is already 4% of your profits. This is not a good strategy at all! However, with a R10,000 trade, the R200 minimum brokerage only consumes 2% of your profit. This is better, but still not ideal. High brokerage rates like this just stack the cards against you and your trades have to be that much more successful. You are advised to keep brokerage to no more than 1.5% of your trade.

With limited capital, there are ONLY FOUR things you can do to ensure brokerage fees do not cripple your ability to trade profitably and have the odds stacked against you: 
1. Trade fewer shares concurrently (more trade concentration)
2. Accept higher risk % (say 2 or 2.5%) per trade
3. Opt for medium-term trades instead of short-term trades (larger gains offset the brokerage effect)
4. Only trade in the most bullish periods indicated by the market safety indicator (i.e at troughs.)

It is probably better to trade the JSE Index or individual ETF's (using any one of our many timers and strategies) with larger concentrated trade sizes to offset the debilitating effects of brokerage. Once you have built up your capital to at least R25,000 or so, you can dabble in individual equities.

To run a trading portfolio of 5-10 concurrent shares at the optimum trade size of R15,000 thus implies you need R75,000 to R150,000 of capital to gain the best advantages from ShareTrader.

For every share displayed in the chart-viewer, the money manager uses a formula incorporating your capital amount (adjusted for the market safety indicator), maximum trade risk percentage, slippage, brokerage and the all-important distance of the share from its 5-day support level, to compute a MAXIMUM RECOMMENDED EXPOSURE as shown in "8" below on the bottom of the TREND chart.

The red 60% is telling you the money manager has consulted with the Market Safety Indicator and deems the market to be cautiously optimistic and will expose 60% of your trading capital to the money management formulas. If the market is in a CAUTIONARY stance it will only expose 40% of your capital to the position sizing formula.  If you see "N/A" here it means the money manager REFUSES to make a recommendation as it would be irresponsible!

The R105,633 in the above example is the recommend maximum exposure for this particular share at this point in time. This is your trade size based on the distance of the share currently from its 5-day support. The further a share is from its 5-day support, the lower this amount will be as the wider your stop will be. This ensures position sizing is calculated to current conditions of the share. We do not believe in one-size-fits-all stops (such as an arbitrary 4% number used by most traders). Established support levels are the best stops used by the professional traders.

You then take the R105,633 and divide it by the share price to compute how many shares you can buy. If you make the R105,633 trade, and the trade goes AGAINST you, then provided you used the 5-day stop shown to you in the chart at time of the trade (see below "STOPS:5d=0.7%") you should not lose more than the 1% or 2% you configured in your JSW_MYSHARES file (unless the trade falls really badly and overshoots the allowance you made for slippage.)
ShareTrader also shows 10-day and 20-day stops distances but this is more useful for when the trade has already been established and is in the green than for use as an initial stop value.

Sometimes, a candidate share is really pumping and can sit 10% above its 5-day support due to a rapid series of advances. Large stops like this can make people nervous. For this reason, we also provide an "iStop" which shows the average daily share-price-drop over the last 2 weeks for this share as well as the maximum daily share drop (0.4% to 0.8% in this example.) In these instances you can use the iStop as a more conservative stop for your trade. Unfortunately the money manager has not been configured to optionally provide a suggested trade size for this value (yet).

If you elect to use a derivative such as a Single Stock Future (SSF) or Contract for Difference (CFD) or Warrants to gear or leverage your trade then the R105,633 REMAINS YOUR TOTAL EXPOSURE and you calculate your margin you have to pay to execute the trade based on the gearing of the underlying instrument. For example, if you decided to execute this trade with a 10x geared CFD then you would have to cough up R105,633/10=R10,563 margin to execute the trade.

Now this is important - with gearing, you STILL use the 0.7% stop indicated in the chart above to decide if you exit the trade or not! Nothing changes. The only difference with leverage is that you have to place a smaller margin into play. DO NOT buy R105,633 worth of SSF or CFD's ! Keep your maximum exposure (R105,633) the same regardless of if you are trading a straight vanilla equity or a leveraged instrument. We have seen so many people go bust because of this simple oversight and out-of-whack risks been taken. Please heed what we are saying here!

9. SHORTLIST CREATION WITH SHOPPING CARTS
This is to assist you scan through a candidate list of shares and save shares you deem worth looking at whilst you conduct an elimination selection process. Assume you are presented with a list of candidates in the watchlist that you manually derived or derived through one of the automated screening functions. You then clicked on the group-chart viewing button to load all the shares into the chart viewer. You can now flick through each chart looking for shares that pique your interest.

When you come across a share you think is worthwhile consideration, click on the yellow shopping cart ("5" in below image) to add the displayed share to the current selected shopping cart. The shopping cart is used to build and save your personal shortlist.



You are provided with two shopping carts, A and B. The active shopping cart is displayed by the status icon on the extreme right of the picture below:

You can see that shopping-cart A is the current active cart and that there are currently 2 shares loaded into it. If you click on the status icon, then the shares in the active shopping cart are transferred to the chart viewer, OVERWRITING the shares that were in the viewer beforehand. This is useful once you have completed flicking through all the watchlist candidates and now finally want to review the shortlist you created. You are no longer interested in the watchlist candidates and want to focus on going through all the shares that were really interesting for you (i.e had the right liquidity, sector, look and feel etc.)

To switch between active shopping carts A and B, click the switch button "1" right under the yellow shopping cart function button. If the current cart is A, the new active cart will become B.

To swap shares in the active cart with those in the chart viewer, click the transfer button "2". This moves all the shares in the chart viewer to the active shopping cart and moves all the shares that were in the active cart to the chart viewer. This allows you to inspect the shopping cart without overwriting the contents of the chart viewer. If you click the transfer button a 2nd time the process is repeated, restoring the viewer and current cart with their contents.

To delete the contents of the active shopping cart, click the ERASE button "3".

Shopping carts are only saved with your current JSW file. When you open the next day's JSW file, the carts will no longer be loaded with the shares you chose the previous day. If you want to keep your eye on a set of shares over a period of days then rather tag them with a "3", as these will then be saved in your JSW_MYSHARES portfolio file and you can filter them out in the watchlist on a daily basis.

10. RESISTANCE LEVELS AND PIVOT-POINT TRADING
In addition to the percentage distance to the 5, 10 and 20-day support levels (right picture below), the chart-viewer now also displays the current share's percentage distance to its 10 and 20-day RESISTANCE levels as shown in the left chart below ("RESIST:")
 
Here we see DISCOVERY, which has just broken under its 5-day support line, is now trading 1.2% away from its 10-day resistance and 2% from its 20-day resistance. This allows you to gauge the "possible upside" of a short-term trade, since if DSY bounces off support it it most likely to reach up to its resistance before maybe faltering again. Many traders like to trade from a bounce off support and then sell-out when the share bounces off resistance (or even gets to its resistance.) This is called PIVOT POINT TRADING. We might come to the conclusion in this specific example that DSY does not offer enough scope for "upside" for a trade. Generally the farther away from resistance a share, the BETTER the possible upside for the trade in question.

You can filter all the shares on the JSE that have just bounced off resistance or support within the LAST TWO DAYS by using the DONCH columns in the watchlist.

Upward slanting yellow arrows show shares that just bounced off the respective resistance level within the last two days, whereas downward sloping yellow arrows depict shares that have just bounced off (tested) the respective support levels within the last two days. The larger the support or resistance that has been tested, the more significant the meaning. Tests of 20-day support are more meaningful than tests of 10-day support for example.

Some traders like to use tests of support as invitations to open a long trade (or close a short trade) and tests of resistance as invitations to open a short trade (close a long trade.) This is called PIVOT POINT TRADING. In the below example, NTC has just breached 5-day support after bouncing off its 40-day resistance, and has a way to fall before it finds support at its 10-day level. This is a classic SHORT PIVOT-TRADE SETUP.

On the other hand, TBS has just bounced off its 10-day support level and has a while to go before it meets its next resistance level and this is a classic LONG PIVOT TRADE SETUP. The idea with these setups is that you are looking for shares that (a) have found significant support (or resistance) and (b) have sufficiently "interesting" distances to their corresponding resistance (or support) levels to warrant a profitable trade. It is no point making a short trade when the share is only 1% away from its next support level as the chances are it will find support 1% further down and bounce up, and this will not leave you much scope for profit after brokerage is taken into account.

You can find all the PIVOT POINT TRADING CANDIDATES by using the drop down filter menu function in the DONCH heading columns in the watchlist and selecting "Filter by color" as shown below:

You can select either slanting down or up arrows to only show shares testing support or resistance respectively, or you can un-tick "Select All" and then check "1" and "2" to show shares testing resistance OR support (i.e show you both long AND short pivot trade candidates.)

11. SUPPORT FOR CFD FILTERING
Many trading subscribers make use of a CFD provider to affect their trades, be it Standard Bank, Sharenet CFD’s, IG Markets, Global Trader etc. Quite often, our algorithms will throw out lists of shares many of which sometimes are not represented by a CFD provider due to liquidity etc. (they are after all in the game of making profit which means they will target highly liquid shares only as there is an inherent cost to them for each CFD they offer).

This makes the job of checking if a CFD is available a little laborious or too reliant on your strong memory!
To assist subscribers using CFD’s with our trading candidate lists, we now have an automated CFD function button that takes ANY list being shown on the watchlist and HIDES all the shares that are NOT represented by your CFD provider. Just click on the blue CFD function button shown below:


To enable this functionality, you need to configure your JSW_MYSHARES file with your CFD provider as shown below. Select SNET for Sharenet CFD's and IG Markets (they are the same), GT for Global Trader and SBK for Standard Bank Online Share Trading (OST).


Whenever a share is displayed in the chart-viewer, there will be a "(CFD)" in front of its name to alert you to the fact that a CFD is available for it from your broker, as shown below:


12. MULTIPLE TRADING CANDIDATE RANKING AND SELECTION
There are currently 5 ways to find trading candidates from within ShareTrader and JSW:

1. Our MA-TREND moving average trough detection system
2. Our SINCERITY breadth-based trough detection system
3. Breakouts on extraordinary volume and activity (DONCH)
4. Our ADTS Trend Reversal system
5. Pivot Point Trading as discussed in section-10 above.

Some traders like to stick to certain strategies for various reasons and green function buttons have been provided that automatically screen the JSE for candidates for each strategy:

Clicking on MA-TREND finds shares that are trading 4% below their previous high and are above their 5 and 10-day moving averages, and where the 5-day average has crossed up over the 10-day average within the last 7 days.

Clicking on DONCH finds shares making 10 or 20-day breakouts on high volumes and activity. But you can also filter for Pivot Point trades in the DONCH columns as discussed in section-10 above.

Clicking on TROUGHFIND shows all shares on the JSE that are making a Sincerity trough BUY signal (their number of back-to-back advancing days has risen from 0 to 2 or 3) or that have shown a ADTS trend reversal. Sincerity troughs are shown with green ticks in the "V" column and trend reversals are shown with  yellow exclamation marks in the "V" column.

The PowerTRADE function gives each  share 1 point for each strategy the share is currently a candidate of. The scores can thus range from 0 to 5. Clicking on the green PowerTRADE button presents shares with a score greater than 1 (a candidate of at least 2 strategies), sorted by PowerTRADE score from high to low:

Shares that have PowerTRADE scores of 3 or more have their "Tickr" code highlighted in dark red, while the rest are highlighted in green. Dark red shares thus represent those trading candidates with the highest probability of success, under the premise that they are candidates of multiple strategies.

Using PowerTRADE allows you to build a equities trading portfolio from multiple recognized (but different) trading strategies, having the highest probabilities of success. Building a portfolio using multiple strategies also gives you strategy diversification, lowering your risk of a particular strategy not being suitable for the market conditions at a given point in time.

The PowerTRADE candidate lists are generally very small, having taken much of the grunt work of candidate elimination away from the trader and allowing smaller lists to work with in the elimination process. Clicking the CFD button after running the PowerTRADE function produces even smaller lists.

Once you have clicked on the PowerTRADE function button, you can click on the group charting function button to view your candidates. The PowerTRADE score for each share is shown in the bottom right hand corner of the left-hand chart in the chart-viewer ("PT="):


>>> END OF TUTORIAL #2 <<<

WE STRONGLY SUGGEST YOU PROGRESS TO TUTORIAL-3 BELOW TO SEE LATEST NEW FEATURES

RELATED LINKS --> | JSW Main Page | Tutorial-1 | Tutorial-2 | Tutorial-3 | JSW videos |
 
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