Friday, March 31, 2006

Strategy Session: Find Long Term Consolidation Breakouts


We thought we'd share a more sophisticated strategy that (in a modified version) one of our hedge fund customers shared with us. Here is the premise:

The key to success is to be able to spot those golden opportunities that everyone wants to be in on - early.

The Strategy: Longer Term Consolidation Breakouts


How It's Modeled: To accomplish this we are going to use the Min Days Consolidations filter and set it to a value of 10 days. Meaning: every stock this strategy shows you must be consolidating in a relatively tight range for at least the past 10 days.

There's more: we then set the Min Position in Range filter to the 50th percentile. Meaning: all the stocks considered must be in the top half of their consolidation range (i.e., 50th percentile or above). This makes sure we are considering stocks with better odds of actually breaking through that resistance. The end result is a lot of upward potential.

Here's one more filter we use as an insurance policy: every stock within the consolidation pattern described above must be in the lower half of the stock's yearly range. We specifically want to look for stocks that already had some bad news or events out of the way and are now potentially making their way back up after being in a consolidated trading range. Using this filter lets us find the stocks that might be overlooked by others.

Once we define the trading universe with Trade-Ideas' filters, we then set a simple trigger point or alert, which is a New High of 5 days. This "K.I.S.S." approach works very well and demonstrates the power of Trade-Ideas, namely: creating a unique trading pattern and then being the first one to see it and trade it - early.

Who Could Benefit:
This strategy can be used by short term momentum and swing traders (i.e., positions from intraday to 2-3 days max) who know what kind of cycle the market is in for the last 8-10 days.
For extra credit you could design the opposite of this strategy for use in more bear markets. Read the Online Help definitions to get started.

Footnotes:
  • Configure this strategy for your own use here.
  • Link to other Strategy Sessions here.
  • Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.
  • June Seminar Footnote - To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/

Tuesday, March 28, 2006

Canada Exchanges Now Accessible in Trade-Ideas


The following press release will be on the wires Wednesday but we wanted to let our blog readers know about this before anyone else:

FOR IMMEDIATE RELEASE: March 29, 2006
PRESS CONTACTS:
David M. Aferiat, Trade Ideas, LLC
Managing Partner, Business Development
Contact Us
info@trade-ideas.com

http://www.trade-ideas.com/

Trade-Ideas' Idea Generation Technology and Real-Time Analysis Adds Canadian Stocks to Its List of Exchanges

ENCINITAS, Calif., March 29, 2006 /PRNewswire/ -- Trade Ideas LLC, publisher of real-time, custom-filtered market data and Idea Generation Technology (IGT), announced today that Canadian traders can now access the same powerful real-time alerts on stock price and volume metrics as their U.S. counterparts have accessed for the last 3 years.

Trade-Ideas is excited to provide Canadian traders, hedge fund managers, and other market participants the opportunity to view the Canadian markets like never before.
“This technology’s potential to significantly increase trading volume on the Canadian exchanges cannot be understated”, says Dan Mirkin, Senior Managing Partner at Trade Ideas LLC. Mirkin continues, “The Canadian markets provide a lot of opportunities and Trade-Ideas’ analytics will only help spot those opportunities more quickly and with more clarity; opportunities that are otherwise very hard to find. This is especially true when it comes to the mining sector, for example. Many highflying mining stocks trade on the Canadian exchanges and as traders become more interested in taking advantage of the moves in these stocks, Trade-Ideas will help them see the real-time opportunities.”
Traders of Canadian stocks used in the beta testing expressed their enthusiasm for the final rollout.
"Considering we are in an era of strong secular trends in basic materials, we foresee a period where resource rich regions of the world like Canada will need to be monitored for ideas. We have been waiting for a tool like this!” adds David Atkinson, portfolio manager and general partner at Forza Capital (Bend, OR).
Canadian exchanges are now part of the Trade-Ideas platforms and are included in the existing subscription plans. No matter which platform is used (e.g., browser or TI Pro), you can already access the new items - new alert, filter or exchange innovations because both applications make an instantaneous "call" to Trade-Ideas servers for the latest improvements as the application runs. When Trade-Ideas adds them, subscribers receive them instantly.

About Trade-Ideas
As a pure pattern recognition tool, Trade-Ideas' focus is on providing next level analytics and decision support via its browser-based or downloadable platform. Via Trade-Ideas clients customize an inventory of alerts and filters to produce a unique view of the markets: theirs. Recent reviews from Barron's, HedgeWorld, Active Trader, The Trade (UK), Stock & Commodities magazine, stock newsletters, and leading brokers describe the service as an accurate, discriminating alert provider that is flexible, simple to deploy, and easy to use. A free demo is available and requires no payment information to get started. For additional product information visit: http://www.trade-ideas.com.

Footnotes
  • June Seminar: To gain a full understanding of how this improvement and others can help you in your trading plan, we suggest you attend our 1st Annual Learning Curve Seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants.Reserve your seat today (conference limited to 100 attendees). http://www.trade-ideas.com/Seminar/
  • Other press releases from Trade-Ideas here
  • Sample of this press release in distribution here

Sunday, March 26, 2006

DiamondTrim speaks: Didn't do your homework? Don't worry.

Today's post is written by a guest contributor named, DiamondTrim. DiamondTrim is an alias for a trader well known to readers of EliteTrader and a few other trading forums on the internet. DiamondTrim was one of the first "power-users" to understand the value of Trade-Ideas and apply its idea generation capabilities to his trading plan. The result generated multiple successes.

DiamondTrim is one of several scheduled speakers at Trade-Ideas' upcoming 1st Annual Learning Curve Seminar in June in San Diego.

I was watching Cramer’s Mad Money recently while channel surfing. His fans call him and talk about all this homework that they do. It got me thinking about homework in general. I was not very good about doing homework during my education but -- I was a damn good cheater. I'm not advocating being a cheater per se, but I am all for taking good shortcuts and avoiding work for work's sake.

So that realization gave me the inspiration for this blog post.

How many of Cramer's fans wake up in the morning and ask themselves, "Did I do my market homework?" Did you? If you didn’t then don’t worry, I didn’t either. Even if you did, ask yourself, "Did I do it well? Am I prepared enough?" The thing is there are tons of problems with doing market homework aside from the
possibility that you might just be wrong or the preparation as useless.

Enter Trade-Ideas. With TI you don’t have to worry about homework. Instead of trying to figure out where things might logically go and competing with Cramer's legions of fans or analysts from Goldman and other big institutions, you can give up on logic and simply watch from courtside seats where they go and ride their coattails or “cheat” with Trade-Ideas. The main thing to know is what to look for when big funds, the ones you really want to cheat off of, are buying and selling. See and Go with the flow.

This is why Trade-Ideas is conducting its first learning curve seminar, to teach their users how to set their sights to catch the big boys in action. I look forward to showing you how I do it.

Let us know if you are a subscriber to Trade-Ideas and would like to guest write your story or trading lesson.

Footnote
DiamondTrim was the inspiration (source) for a Strategy Session called "40+ and Going". You can see it here: http://marketmovers.blogspot.com/2005/09/strategy-session-40-and-going.html

Friday, March 24, 2006

GOOGLE Finance NEEDS YOUR HELP

Google Finance made its debut this week and many have already weighted in with opinions, critiques, and suggestions.

We gave our suggestion directly to the Google Finance team from their blog (gblog@google.com). Google Finance currently covers business info, news, and interactive charts. Essentially we asked, "What about some technical analysis?" This would round out the offering and bring value to a whole community of traders and investors. We then pointed to the free stock "snapshots" that we offer from our website. Take a look and enter a stock symbol if you haven't seen this yourself: http://www.trade-ideas.com/StockInfo/

Our suggestion prompted a reply which appears below:

Thank you for your note. This is just an automated response to let you know that we received your email about Google Finance. Your feedback is essential to the development of this product. Due to the large volume of emails we receive, we may not be able to respond to your email personally. Please be assured, however, that we read each suggestion, and we'll make improvements to Google Finance based on your feedback.

We really appreciate your taking the time to write us.

Regards,

The Google Team

It's a nice form letter given the vast number of responses they receive and I believe that someone may actually read our note. But one letter may not be enough. That's why this post is ASKING A FAVOR FROM OUR CHERISHED READERS AND FANS OF TRADE-IDEAS:

Help us bring our analysis to Google Finance's attention. It'll be like writing a letter to Congress ONLY IT MAY ACTUALLY MAKE SOMETHING HAPPEN! ;)

Here is the link to make the suggestion (in addition to the email address above):
http://www.google.com/support/finance/bin/request.py?contact_type=suggestion&submit=Continue

Here is some suggested text that you can cut and paste or modify:

Greetings. Google Finance is [blank].
One item that would be a great addition is the inclusion of technical analysis. Trade-Ideas offers technical snapshots of every exchange traded stock in the U.S. and they are free for all to use.

Enter a stock symbol at their link or click on any of the free end-of-day scans they offer: http://www.trade-ideas.com/StockInfo/

Please consider adding this data and making Google Finance the best it can be.


Thank you for helping us by sending this suggestion to Google Finance. If it works out we'll send out T-shirts with our two logos!

Footnote: We found this neat site that is all about Google that we didn't want to forget: http://www.usabilityviews.com/simply_google.htm

Thursday, March 23, 2006

Strategy Session: Objects in Motion Stay in Motion


Issac Newton's First Law of Motion: Law of Inertia explains the basics of planetary motion, coach potatoes, and our latest Strategy Session. This one in particular has us rubbing our hands together because it:



  • Is simple to understand, like Newton's first law, and yields predictable results

  • Is germain to market conditions we are currently experiencing (See yesterday's post)
  • Reveals what innovative improvements are coming to Trade-Ideas
The Strategy: Objects in Motion, Stay in Motion
This strategy extends the premise of an earlier strategy we discussed ("Strategy Session: 40+ and Going", 9/23/2005). The idea is simple: Be alerted any time a stock makes a daily high that is the 100th occurance or more. If a stock makes 100 highs in a trading session it has high odds of getting to 150 or 200 or even 300 high occurances. Basically this strategy looks for trains out of the station, running full speed ahead, and on a non-stop route to its next destination. It's a great and one of the few strategies for the afternoon and closing sessions of the day. All aboard ...

How Its Modeled
The set-up includes these filtering conditions:

The alert within this filtered universe appears any time there is a print for a higher price than the rest of the day.


Here's What's Coming
Finally this strategy serves as a good illustrative example of what will soon be added to Trade-Ideas: We are testing an add-on module for Trade-Ideas that will allow a subscriber to calculate odds of an alert being higher or lower based on historical data and configurable time frames. The new functionality will answer the question:

"What are the odds of a stock being higher by 50 cents, 30 minutes after this alert takes place?"

The feature produces a set of probabilities for the subscriber that serves as valuable feedback for the creation of trading systems. Take the "Objects in Motion" strategy as an example. In addition to the real-time output of stocks that match the strategy's criteria, a trader will also reference probabilities for selected price targets (e.g., 50 cents) over time frames (e.g., 30 minutes) for each alert produced.


Look at our What's New section of our website for the running list of what we've been adding recently.

Footnotes:
  • Configure this strategy for your own use here.
  • Link to other Strategy Sessions here.
  • Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.

  • June Seminar Footnote - To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/

Tuesday, March 21, 2006

Frustrating Markets: Explanation and Your Edge

Dr. Brett Steenbarger's recent posts describe why it's so hard lately to make money in the markets. Brett's hard to ignore data sets and factual explanation form the basis of smart trading plans - ignore them at your peril. Here's the key finding that has big implications for your trading plan:

(Note: the point between values 8657 and 9198 where the 125-line is last broken is September 2001 - a historic occasion but not for the obvious reason)

Key Takeaway:
The Dow, S&P and other broad market indices are experiencing a double frustrating whammy of difficulty - low volatility and lower 'trendiness' (as shown in the chart above). Trendiness has been trending downward! In particular since September 2001 gains or losses on day one are more likely to reverse on day two. As Brett observes,

We are seeing reduced volatility *and* we are seeing reduced trendiness. That means that traders are able to take less movement out of trades *and* they are less likely to see movement carry over from one period to the next. Is it any wonder that traders are experiencing such difficulty? We have never seen a market personality quite like this one, in which low volatility has also been accompanied by low trending. To blindly hope that the market will "get better" is not a trading plan, much less the plan for a trading career. The good news is that there are trading instruments with far higher levels of volatility and trendiness, and those include many individual stocks.
The Edge that's Trade-Ideas
Brett's findings underline the importance of pattern recognition and Idea Generation Technology (IGT) among individual stocks and why a tool like Trade-Ideas improves a trading plan that understands the recent forces at work on the markets.

Stay away from the poor trading conditions of the overall markets. There are always individual stocks bucking the overall trend. Trade-Ideas helps you find them. We often liken the markets to the ocean where the broader markets and major indices are at the surface - often choppy and tumultuous. The sectors and individual stocks, however, exist at lower depths - sometimes in their own current separate from the activity above. Trade-Ideas' filters remind us of a periscope down that lets you see such movement.

Our next post is a Strategy Session that provides a good example.

Footnotes:

Wednesday, March 15, 2006

Strategy Session: IBD's Top 10 Under 10


Investor's Business Daily does a great job giving individual investors good metrics by which to follow stocks. One example is their Accumulation/ Distribution Rating System. An 'A+' rating suggests that a stock is being accumulated by institutions while a rating of a 'D' suggests institutional selling. Here is IBD's definition:

"The Accumulation/Distribution Rating tracks the relative degree of institutional buying (accumulation) and selling (distribution) in a particular stock over the last 13 weeks, where 'A' equals heavy buying and 'E' equals heavy selling." Read a full explanation at IBD.
Yahoo uses this IBD data in a helpful, recent article called, "Beat the Market". The article had the following list of 10 Highest -Rated Stocks Under 10: (data from March 13, 2006)
  1. CBIZ (CBIZ) - IBD Stock Checkup
    Acc/Dis Rating: A+. In February, the provider of outsourced business services announced plans to repurchase up to 5 million shares. More.
  2. CyberSource (CYBS) - IBD Stock Checkup
    Acc/Dis Rating: A+. Last week, the seller of electronic payment and risk management products acquired BidPay.com from First Data for $1.8 million in cash. More.
  3. Investools (IED) - IBD Stock Checkup
    Acc/Dis Rating: A+. Kaufman Bros. recently initiated coverage of the investor-education firm with a “Buy” rating. More.
  4. iMergent (IIG) - IBD Stock Checkup
    Acc/Dis Rating: A+. The provider of e-commerce solutions has a 3-year sales growth rate of 73%. More.
  5. Sirenza Microdevices (SMDI) - IBD Stock Checkup
    Acc/Dis Rating: A+. Its radio frequency components are used in the commercial communication and aerospace/defense market. The company recently raised first-quarter earnings guidance. More.
  6. ADAM (ADAM) - IBD Stock Checkup
    Acc/Dis Rating: A. The provider of health information products is scheduled to report fourth-quarter earnings on March 14, before the open. More.
  7. Finisar (FNSR) - IBD Stock Checkup
    Acc/Dis Rating: A. The fiber-optic network equipment maker hit a new high last week after Jeffries & Co. initiated coverage with a "Buy" rating. More.
  8. Merix (MERX) - IBD Stock Checkup
    Acc/Dis Rating: A. The maker of printed circuit boards recently had an Attractiveness Rating of 79 from IBD Stock Checkup, ranking it 4th out of 28 stocks in IBD’s Electronics-Contract Mfg group. More.
  9. Pacific Internet (PCNTF) - IBD Stock Checkup
    Acc/Dis Rating: A. The Singapore-based Internet service communications provider was recently awarded a contract to provide voice and data services to an Australian travel firm. More.
  10. Answerthink (ANSR) - IBD Stock Checkup
    Acc/Dis Rating: A-. The business and technology consulting firm has an Overall Rating of 80 from IBD Stock Checkup, ranking it 20th out of 78 stocks in the Computer-Tech Services group. More.
Use Trade-Ideas to show you how to make sure you catch the move in all of these stocks. Here's how:

The Strategy: IBD's Top Ten Under Ten

Step 1) Create a custom symbol list in Trade-Ideas called IBD's Top 10 Under 10. Video Demo How To here. Help section here.

Step 2) Set up an appropriate strategy to watch this group of 10 stocks - for example: IBD's Top Ten Under Ten


How It's Modeled:
Note: Remember to create the symbol list in Step 1 with the $10 stocks mentioned above or regularly in IBD or Yahoo (this is your de facto filter); otherwise, you will find yourself watching EVERYTHING under $10. As the list of 10 under $10 updates or you decide to model other suggested lists, modify your symbol list accordingly and name the alert window so you keep track of what's being watched.

The set-up includes these additional 2 filtering conditions:

The alerts we select as triggers within this filtered universe are all meant to capture significant price movement, strong sudden volume surges, and identifiable chart patterns.

Who Benefits:
A lot of people read IBD - not everyone uses it with Trade-Ideas. What we are saying is, "Don't just get there, be there first!"

Footnotes:

  • IBD's website here.
  • Yahoo's Beat the Market article here.
  • Configure the strategy mentioned in this post here.
  • Link to other Strategy Sessions here.
  • Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.

  • June Seminar Footnote - To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/

Tuesday, March 14, 2006

Domo Arigatou gozaimashita (ありがとうございました)



There is virtually no way to go in trading and technical analysis without running into Japanese Candlesticks. This technique, developed by rice traders in the 1600's allows one to deduce future price behavior by seeing patterns in the trading range, the high, the low, and the closing price of a trading session. Candlestick charting today continues to be one of the most popular ways to view market data. When we made the alerts available to our beta users, the response was a genuine, "Thank you very much" - the title of this post in Japanese. To which we say, "Matte! Ganbatte!" - Wait! There's more!

Here is where Trade-Ideas takes it to another level: We know that candlestick experts can use knowledge of particular price patterns like the Doji, Gravestone Doji, Long-legged Doji, to have an edge in the markets. However these patterns are difficult to spot and demand complete focus on one or two stocks to find these patterns developing.

That is no longer the case.

Trade-Ideas, after listening to our customers (how do you say that in Japanese?), publishes these special patterns in real-time. Now you can see when a stock makes one of these interesting patterns as it happens. The first pattern that we detect is a Doji pattern for 5,10,15, and 30 minute candles.

Note: Remember that this set-up is a sketch meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.

This is the first release of what will be our complete 12 Major Japanese Candlestick Patterns. Our readers can preview what's coming and read how to use them here:
http://candlestickforum.com/PPF/Parameters/16_20_/candlestick.asp

These alerts top the list of most frequently requested additions to our alert service. Hopefully these alerts will leave those who asked for them and many others saying:

Footnote:
  • No matter which platform you use (e.g., browser, TI Pro), you can already access the new items - new alert and filter innovations like these are automatic to subscribers because both applications make a "call" to our servers for the latest list whenever someone interacts with our alert window settings via 'Configure'. When we add them, you receive them instantly.
  • Users of Trade-Ideas Pro are encouraged to download the latest version of the application. This is unrelated to the new alerts or filters. Rather a download of the latest version of the application is necessary to benefit from other aspects of the service, like minor visual enhancements and background "plumbing" maintenance that keeps the service as fast as possible.

Friday, March 10, 2006

List Mania: Top 7 Trading Strategies


Here is a list of the most popular strategies subscribers either use as is or modify to better fit their trading plan. Note that these items are from our list of pre-configured strategies that's available on our site and inside Trade-Ideas Pro (under "Samples").

For the first time this list also includes a strategy from our popular series, "Strategy Session", where we model additional methodologies found in articles, speeches and/or inspiration that we get our hands on.

Here is the list of the Top 7 Trading Strategies for the last 21 trading days ending Thursday, March 9, 2006 (does not include our widely seen Free Demo):

Remember these strategies can be used as is OR they can be modified to fit your own trading plan (as they are intended). For example by merely changing the Minimum Average Daily Volume to a different threshold, you see a whole different layer of the market than someone using the original configuration. Imagine what changing the Minimum Relative or Current Volume filter will do. The filters are like a periscope into the market. Change some of the settings and you'll see completely different schools of fish than someone at another depth.

Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.

Trade-Ideas Learning Curve Seminar - Sign Up Today!

To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. Beautiful Del Mar, CA (San Diego) offers a chance to meet other successful traders, build a network, and learn a lot techniques and trading wisdom. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/

Thursday, March 09, 2006

Trade-Ideas Learning Curve Seminar: Save the Date!



We began accepting payment and reservations for our 1st Annual Learning Curve Seminar on June 16-17, 2006 in San Diego (Del Mar!), CA. Already the response ensures us the interaction and the conversations during breakouts and over drinks will be rich, insightful, and full of 'ah-ha' moments.
  • Agenda details and the event schedule are here
  • Registration information for the seminar is here
  • The latest updates on any changes will be here first

LCS will take place in beautiful Del Mar California (right across from the racetrack!) in June and will feature trading pros who use Trade-Ideas and wear their P & L on their sleeves for everyone to see.

Some of this year's sponsorships have already been spoken for, so if you are interested in sponsoring LCS1 or attending this year's event please sign up at the link above or email us at events@trade-ideas.com to the attention of Heather Iantorno.

Wednesday, March 08, 2006

Patent Pending

UPDATE 3-14-2006:
We received our customer number from the US Patent office today.

Trade-Ideas announces the start of the process to file for a patent with the U.S. Patent office. Today we applied for a Patent Application Number for the patent we intend to file; namely, our Volume Weighted Algorithmic Data Modeling (VWADM) technique. The methodology allows our software to gauge supply and demand levels for stocks, futures, and indices. It is responsible for giving investors an improved way to find appropriate prices to enter buy and sell orders.

Friday, March 03, 2006

Strategy Session: Sequence Analysis


Dr. Brett Steenbarger explores the difference between mechanical system traders and historical pattern traders in recent posts and as usual, comes up with insightful conclusions. Mechanical traders trade a model. Historical pattern traders conduct ongoing modeling as a dynamic process. For example, if you know what the market did yesterday and you see how the market opens today, can you make reliable forecasts to assist you in your trading? Will you know if you are swimming against the current or with it? Historical pattern traders use signposts to confirm if they are on the side of history - or against it.

An example of historical pattern trading is something Dr. Steenbarger calls Sequence Analysis. Here is Brett's explanation:

"I examine every historical trade identified in my analyses and then walk them forward to identify the normal sequences of profits and losses. I'm specifically looking for key events that separate the winning trades from the losers, so that these could serve as rational exit points. To give but one simple example, if I find that 85% of all winning 10-day trades started out by being profitable in the first two days, I might not want to hold a loser after two days." (Note: emphasis added)

In sequence analysis, you always update forecasts with the most recently available data. That's where Trade-Ideas comes in. Use Trade-Ideas to find the rational exit points OR use it to scan for the key events that indicate the higher probability of winning trades.

The Strategy: Sequence Analysis - Down Day Followed by Strong Open: Bullish

You can read Brett's full description here. In this example of Sequence Analysis the key event question is: What has happened historically when a down day has been followed by a strongly up open? The short answer is: a strong open following a weak day affects the market's short-term trajectory. Let's see it configured.

How Its Modeled

The set-up includes these filtering conditions:

The alerts we select as triggers within this filtered universe are stocks that: increase by more than 3% in price from the opening OR cross daily highs OR running up with momentum.

Who Can Benefit

Dr. Brett Steenbarger:

"This is an example of how updating forecasts with real time data can greatly aid trading. Traders need not wait for real time events to occur, however, to conduct these analyses. They can prepare for real time possibilities by conducting "what-if" scenarios with the historical data. Such sequence analysis would look at all historical occasions of market declines . . . and then investigate what happened when the following day opened strong."

For extra credit you could design the opposite of this strategy (i.e., Down Day followed by a weak open) for use in more bear markets. Read the Online Help definitions to get started.

Footnotes:

  • Dr. Brett Steenbarger's blog here.
  • Configure this strategy for your own use here.
  • Link to other Strategy Sessions here.
  • Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.
  • June Seminar Footnote - To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/