My Acceleration Bands (as shown in chart below) serve as a trading envelope that
factor in a stock's typical volatility over standard settings of 20 or 80 bars. They
can be used across any time frame, though Headley prefers to use them most across
weekly and monthly timeframes as breakout indicators outside these bands, while using
the shorter time frames to define likely support and resistance levels at the lower
and upper Acceleration Bands. Acceleration Bands are plotted around a simple moving
average as the midpoint, and the upper and lower bands are of equal distance from
this midpoint.
EBAY Chart with Acceleration Bands
Interpretation:
The principle of Acceleration is one of the most critical lessons that active traders
must learn. Stock traders need to get the best bang for their buck. They desire to
rotate capital to the best performing stocks quickly and then rotate out of those
stocks when the acceleration period ends. The goal is to keep moving your capital
into the best-performing stocks. And option buyers especially need to be in the best
trending stocks, as the time lost while holding an option can best be overcome by
stocks that move sharply in the anticipated direction. We want to achieve maximum
movement in the stock over the least amount of time possible.
I started my trading career focused on trendlines as a way to buy stocks at important
support points and sell stocks at resistance points. As my trading progressed, I
noticed that the biggest winners were the stocks that broke out and never gave you a
chance to buy them back at support. I've learned that the best profits come from the
parabolic stock moves. These are the stocks that don't give you easy chances to get
into them - what some might call "runaway" situations.
Based on years of research and monitoring the profiles of these stocks, I noticed
that these runaway stocks have several factors in common:
- They are usually in growth industries, like technology, communications,
biotechnology and health care.
- Earnings are usually growing at very fast rates, typically 30% or more and many
times at 100% or more.
- Some amount of media debate about the company's future prospects - the best
scenario is to find a stock that is getting attention for being "overvalued" - I
often find that Acceleration Stocks often get more overvalued until the crowd
recognizes the stock as a clear winner.
- Usually there is a breakout to a new high over the prior 50-bar high - these
breakouts have the most longevity in my experience. Most investors like to buy stocks
near their 52-week low and hope it returns to the 52-week high. Historically, the
studies I have done show that over 80% of the leaders for the next 12 months were
typically within 15% of their highs when their upside breakouts began.
After studying many different indicators to find where this "breakout point" appeared
to reside in most stocks, I developed my Acceleration Bands indicator. There are
several things I can tell you about it here publicly (subscribers to my daily
services get access to the actual Acceleration Bands formula):
Usually I am looking at the last 20 bars on the Acceleration Bands - on a daily chart
this incorporates roughly the last month's trading activity, while on a weekly chart
this covers 4-1/2 months and a monthly chart just over 1-1/2 years of price action.
The upper and lower Acceleration Bands are plotted equidistant from the simple
20-period simple moving average (the middle blue line in the charts below). A daily
chart shows a 20-day moving average, and a weekly chart plots a 20-week moving
average.
Acceleration Bands adjust for a stock's volatility - the more volatile the stock's
price action over the last 20 periods, the wider the bands will be around the moving
average.
Once I see two consecutive closes above the upper Acceleration Band, I get a buy
signal - on trending stocks this will often lead to a major upside Acceleration move
- on choppy trading range stocks, this will often be a headfake - I use historical
data which I share with subscribers to show which stocks have performed the best (and
the worst) based on several entry and exit rules.
One close back into the Acceleration Band signals a traditional exit of the trade, as
the Acceleration period is now likely to end.
Here is an example of how Acceleration Bands work:
You'll notice in the chart below how Ebay broke above the Upper Acceleration Band in
October in the mid-60 range. Note how the stock only briefly tested the upper band in
December, January and March as the bands adjusted higher. But if you have some stocks
in mind, try this indicator for yourself.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
#forex4u - chat forex MIRC
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