Will you be able to ignore bad press of a company if you get a bottom fishing buy signal?
Let us look a the scenario where you just received a buy signal in a company like for example Astra
Zeneca. You know that the system signaling the buy is a bottom fishing system
with about 37% chance of being profitable, on average returning 7% profit within
- Will you be buying or will you suddenly find yourself second-guessing your system?
The old knowledge you have of the company should not affect you
You might have read of a company like Astra Zeneca in the papers lately. You might there have learned that
they are having problems with the marketing of some products on the international market, and that some of their products are not considered
competitive since other vendors products are almost as good and a lot cheaper.
Some of their old patents might be described as soon outdated and more competitors will soon enter
their market. You once again look at the chart, it is in a downward trend. You
look at news on the net about the company and find very little.
- So you have a
downward trend, bad press, and no positive news. What do you do?
Ignoring signals due to old knowledge, means that the system will not work for you
Let us say you decide not to buy, and then miss the fast upgoing stock move. A
couple of days later you read an analysis of the company stating that their
portfolio of researched products is considered stronger than what has been
believed earlier and that they are recommended as a buy.
Most likely, your system caught those tiny signals indicating that this was a company for which
there started to appear buyers. Probably due to some positive information not
known to the whole market yet. So what did you do wrong?
You let your old knowledge of the bad state for the company interfere with
your belief in your trading system. Your bottom fishing system is designed to
find turning points in downward moves. The reason for the downward move is
likely to be lack of positive press, or even availability of negative press. You
are not likely to have inside information of upcoming positive news when your
system triggers. If you hold your buys in this situation you are second-guessing
your system, and letting old knowledge cloud the fact that the system signaling
the buy is designed to find turning points in downward moves.