Why did you change the TSM trade methodology? ... Andre

Dr. Miller,

The change of methodology seems to be recent since I can see open trades on which I believed you were using
the prior TSM methodology.

May I ask you why you switched?

Having been through most of the material available on your web site, it appears that the other method was pretty
solid although the new one seems to be very simple in its application.

Thanks for your help,

Andre

..........

The prior approach was solid because of the TSM approach to picking a watch list,
which has not changed. Further, the strategy has always been buying fundamentally
sound stocks in pullback (buying temporary weakness) and then selling into strength.
Again, that has not changed.

What has changed is the qualification of the the two. The earlier method based entry
on pullback to major support (usually a major moving average-the 20-, 50- or 200-day),
a stop-loss criteria based on violation of that support and a profit target based on profit
size (more subjective).

As a scientist, I continue to research various aspects of the approach, and as an avid
follower of Larry Connors' work, I know the power of the 2-period RSI as a trigger for
entry and exit. My work suggests that it even works better for fundamentally sound stocks.

I like the automated nature of the trade (far less subjectivity): (1) TSM stock above its
200-day moving average, (2) 2 consecutive days RSI(2) below 15 (hopefully pulling back
to major suppor), (3) enter next day's open (limit order placed in evening at prior day's
close), (4) exit at next day's open after a close beyond 80 RSI(2) (definitely selling into
strength.

Too, from a risk control perspective, I want to trade from 5-10 of these positions at any one time,
as the average loss for the group has a very small probability of being negative.

Ric Miller, Ph.D.
6-Sigma, Master Black Belt