Tuesday, August 29, 2006

Declan Fallon Reviews The Odds Maker

Thank you Declan! Declan Fallon reviews The Odds Maker (what's that?) and provides some great feedback we intend to use as we refine the tool. Last week Declan and several other fans of Trade-Ideas received the beta version of The Odds Maker to begin the process of kicking the tires and expressing their first impressions. The official release of the beta for The Odds Maker will be this Friday. Directions on getting started will be posted here.

Here is the link to Declan's review of The Odds Maker (with lots of good screen shots).

Declan asked us 2 questions and we responded. Here's our answer:

Dear Declan,

Let’s answer your first question about net winnings in The Odds Maker. The answer comes from our guidebook - [here is the relevant section:]


4.5 Net winnings: $62.45

Net winnings looks at the total amount of money made using this strategy. If the result is positive, then money was made. If the result is negative then money was lost. This measure is another that does not take the profit target into account. Winning is, quite simply, the difference between the entry price and the exit price.

Multiply the average lot size in trades by the net winnings to estimate a strategy’s hypothetical return minus any assumptions regarding commissions or slippage. In this case, if 1 share of each stock in the strategy were bought, $62.45 would have been made. Of course, if 1,000 shares of each stock had been purchased, $62,450 would have been made. This result looks different if percent, instead of dollars, is selected for the profit target. In that case the result would say something like
“Net winnings = 162.5939%”. In this case if $100 worth of each stock in the strategy were bought, $162.59 in profit would have been made. Of course, if $10,000 dollars worth of each stock had been purchased, $16,259.39 in profit would have been made.

The answer to your second question is a good one. We think there enough data points to evaluate strategies. Here’s why. First, remember that The Odds Maker looks at the entire market – unlike other backtesters who evaluate one stock. If this were the case with The Odds Maker we would have gone back much further in time. When you see the results look at the denominator that tells you the number of trades evaluated. This number can go into the 900s, 1000s. Over a 2 to 3
week time frame that’s almost too many trades for a human to make per day.

Second the 2-3 week timeframe puts more of an emphasis on the recent moves
of the market to highlight whats working now. Given these 2 points we think The Odds Maker certainly analyzes a lot of data to arrive at timely, relevant guidance in crafting a strategy that’s most in tune with the market.

Let me know if this explanation makes sense or not. Thank you for the blog mention and the Forbes information.

Best,

David

Friday, August 25, 2006

Daily Ticks

A list of what's got our attention today:

Evaluating Stock Market Blogs

Dr. Brett Steenbarger offers a 4-point criteria for judging blogs (especially financial ones) as worthy of your precious reading time in an article about stock market blogging.

"Clearly there are more blogs out there than we can hope to follow regularly. Accordingly, I thought I’d pass along a few of the ones that I have found to be particularly worthwhile. These sites offer four basic features:

  1. Frequently updated content –at least daily
  2. Unique content–fresh perspectives on markets, the economy, stocks, trading, etc.
  3. Knowledegable content–information based on clear reasoning, research, and experience.
  4. Participation in the blogger community - linking content to broader material
    in the blogosphere and on the Web for enhanced depth of coverage.

Let’s look at a few examples of each:"

Tracking TRIN Numbers Ahead of Market News

Brett wrote another article earlier this month about TRIN values ("When Investors Don't Believe a Market Rise: High TRIN, High Price"). Here is a real-time update on the TRIN for several markets to keep an eye on as you approach key market announcements like economic numbers, Fed meetings, etc.:

Stock Scan Spotlight: 7 Day Consolidation

This list shows which stocks have been consolidating for the previous 7 days. This is based on a 40 day stock chart. The request is exactly 7 days, no more, no fewer.

The symbols are sorted by volume, with the highest volume stocks on top. Low volume stocks may not appear at all. This is a limit of the stock screener, not the real-time product.

There are some interesting names on this list as of today like AAPL, AMZN, BAC. These tightening ranges, like a coiled spring, may indicate significant moves are ahead.

More free end-of-day scans are available in our Research Center.

Previous Ticks

Thursday, August 24, 2006

The Odds Maker for Scottrade ELITE Customers

If you are a Scottrade ELITE customer, follow the following steps to use The Odds Maker at no cost during this beta period.

  1. Download the version of Trade-Ideas Pro featuring The Odds Maker
  2. Log in with the username 'DEMO' and password 'OddsMaker' (case sensitive)
  3. In your Scottrade ELITE platform create any strategy you would like to test with the Odds-Maker. Right click in the alert window and select “Collaborate”. That will open up the collaborate window with a highlighted link. Right click in that link and copy the text string.
  4. Return to the Trade-Ideas Pro application (where you are logged in as DEMO). Open an alert window, right click in that window and select “Collaborate”, then paste the link you copied from your Scottrade ELITE into the newly opened Trade-Ideas Pro alert window.
  5. Press the “Run” button in The Odds Maker and test any strategy that comes to mind.

Wednesday, August 23, 2006

Interview with Jamie, Wall St. Warrior

Be sure to read the latest installment in a great series of interviews conducted by the StockTickr website. The latest interview stars Jamie from Wall St. Warrior. Jamie's blog describes detailed set-ups of stocks from a watchlist often sourced from his use of Trade-Ideas. Also mentioned in the article are TraderMike, Trader-X, and DownTown Trader.

Recently StockTickr interviewed one of the Trade-Ideas Managing Partners, Dan Mirkin.

The series offer great insight into many different trading styles.

Tuesday, August 22, 2006

Track Data Corporation Selects Trade-Ideas’ Idea Generation Technology to Advance its NewsWatch Service

UPDATE: Listen to the Podcast Interview!


Download this press release as a .pdf file
Complete press release appears at PRWeb

PRESS CONTACTS:
Rafi Reguer, Track Data Corporation
VP, Corporate Communications
Rafi_Reguer@trackdata.com
http://www.trackdata.com/

David M. Aferiat, Trade Ideas, LLC
Managing Partner, Business Development
david@trade-ideas.com
http://www.trade-ideas.com/

BROOKLYN, NY — Track Data Corporation (NASDAQ: TRAC) today announced that its NewsWatch service now includes Trade-Ideas, the premier tool for idea generation technology and real-time analytics of the markets, as part of its roster of content providers.

“NewsWatch is news filtering software for traders’ desktops. One of the ways we distinguish NewsWatch from other products is to offer unique news sources and analytic tools. Trade-Ideas is a terrific analytic tool for traders. NewsWatch clients can now receive alerts from pre-configured strategies, specifically designed for them, that look for statistically unusual movement across an array of technical indicators,” said Marty Kaye, Chief Operating Officer of Track Data.

Some of the technical indicators produced by Trade-Ideas include unusual Relative Volume and Volatility; Moving Average Crossovers and Breakouts; False Gap Retracements; and Strong Momentum.

“Trade-Ideas' analysis positions NewsWatch clients for breaking news, stock rallies, or approaching support and resistance levels in real-time. It serves as valuable color commentary to the market’s activity and a useful addition to their existing toolbox,” said David Aferiat, Managing Partner of Trade Ideas LLC.

Trade-Ideas provides access to detailed information on more then 10,000 stocks, ETFs, indices, and future contracts on all the North American exchanges. For a free demonstration of Trade-Ideas, please e-mail a NewsWatch representative at help@newsware.com.

COMPANY INFORMATION

Track Data Corporation
Track Data is a New York-based financial services company that provides direct access brokerage, real-time financial market data, news, and research to institutional and individual investors through dedicated telecommunication lines and the Internet.

For professional traders and individual investors, Track Data’s NewsWare division offers NewsWatch, a PC-based application that aggregates news from thousands of sources. Featuring real-time full text filtering and complex queries, its real-time alerting functions allow users to choose topics of interest and be among the first to know when news breaks.

For professional investors, Track Data Securities offers proTrack, a direct access trading platform with fully integrated market data. proTrack offers unbiased trade routing, allowing clients control over where their orders are sent. proTrack is also available to broker-dealers as an execution platform.

The Company also owns and operates the Track ECN, an electronic communications network that allows traders to display and match limit orders for stocks. Track ECN offers subscribers a Rebate Model, which offers the highest published rebate in the industry and a Free Model, which offers no access fees to market participants who access its liquidity through Nasdaq's SuperMontage. Because of its no access fee, the Free Model is offered in Nasdaq's first tier with market makers, providing subscribers with fast executions. Track ECN offers subscribers anonymous executions and speed.

For individual investors, Track Data Securities offers myTrack and TrackTrade, both fully integrated, Internet-based online trading and market data systems. Each platform offers direct access online trading, allowing users the choice of where to route their equity and options orders. myTrack and TrackTrade offer continuous, dynamic streams of live market data powered by application-based software and a constant server connection similar to systems used by professionals.

Trade Ideas, LLC

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, 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 limited demo is offered for evaluation purposes. Subscriptions are cancelable at any time, and require no payment information to get started. For additional product information visit: http://www.trade-ideas.com.

Copyright © 2006 Trade Ideas, LLC. All Rights Reserved.

# # #

Saturday, August 19, 2006

TraderMike Shares How He Uses Trade-Ideas Pro

As part of an occasional series of great approaches to trading, written by fellow traders/bloggers, here is a series we call "Truer Words".
  • Part 1 is posted here.
  • Part 2 is posted here.
  • Part 3 is posted here.
  • Part 4 is posted here.

The articles discuss topics of trading which include: emotional intelligence, trading journals (especially, but not limited to, the ones that document benefits of using Trade-Ideas), size management, P/L performance, and many other dimensions of the trading process - not just pre-trade analytics and idea generation.

TraderMike Shares How He Uses Trade-Ideas Pro

TraderMike's well written, daily insights into how he's trading markets make him a magnet for new and seasoned traders. If you haven't read or subscribed to his blog posts, we urge you to do so. Many in the financial community link to Mike to help adjust their market bearings. We at Trade Ideas LLC listen and produce new alerts and improvements to Trade-Ideas based on several of Mike's recommendations. The NR7 alert and the addition of custom sounds to specific alert windows are examples. Mike wrote about his use of the NR7 alert in more detail in a recent post, "How I Monitor So Many Stocks for Narrow Candles ".

Here we offer a major 'tip of the hat' to TraderMike for this weekend's post, "Trade-Ideas Pro Usage Tips".

In the article TraderMike lists what features and methods of Trade-Ideas work best for him. His list covers the basics that can be easily picked up and incorporated into anyone's use of the tool.

Here is a tip of our own: If you are not a current subscriber to Trade-Ideas you can use the limited demo version of the tool or you can create an account from a link to Trade-Ideas on TraderMike's daily "Watchlist" posts and receive a full access trial for 7 days.

Footnote

More true words appear on our website under Testimonials.

Wednesday, August 16, 2006

Odds Maker Presentation Scheduled


Lecture Hall
Originally uploaded by aNNa Munandar.

The date of our presentation showcasing the features and functionality of The Odds Maker will be:

Wednesday, August 23rd, 2006 at 1:00 PM EST.

We will be using GoToMeeting and have a room of 10 participants who indicated their interest in the comment section of our previous post, Learn What's Impressive About The Odds Maker.

A separate email containing instructions on how to attend the presentation will be sent separately the morning of the 23rd.

If you missed the chance to attend this presentation, leave us a comment and we'll schedule more of these.

Monday, August 14, 2006

Learn What's Impressive About The Odds Maker

Is there any interest in being invited to a private web demonstration of The Odds Maker by Dan Mirkin? I just got the 2-cent tour and was pretty impressed. But don't take my word for it which is why we'll take the first 10 RSVP in the comment section below.

The presentation will be 30 minutes total (20 minutes demo and 10 minute Q&A if needed) - date and time to be determined.

More articles about The Odds Maker:

Wednesday, August 09, 2006

What the Odds Say so far


As we have mentioned on previous blog posts, we are running "The Odds Maker" in alpha-testing internally to determine how it's working, what it is saying, and its overall stability under simulated high-traffic conditions.

We receive a lot of emails and comments asking us, "What is working in today's very crazy market?". The answer?

Extensions away from the mean. Specifically

Momentum shorts reverting to the mean.

By far the strategies with the highest probability of winning trades over the last 3 weeks are those that go short after an extended move upward away from its average price on relatively low volume. These strategies, modeled using The Odds Maker, point to winning trades at the rate of 60 - 75%. This is contrast to our own Sample Strategies featured within Trade-Ideas. In fact in reviewing our Sample Strategies and many of those found in our blog's Strategy Sessions, we find few strategies that give better than 50% odds on the long side at this time. That could easily change.

This probability is not based on magic numbers of any kind, neither does this mean that are no high R trades on the long side out there. Rather the statistical analysis that compares the performance of these strategies within the recent market activity points to a larger number of winning trades on the short side than the long side. Can it change? Yes it can, but right now the path of least resistance is down.

Tuesday, August 08, 2006

Strategy Session: The Fed Watcher


First there's an important caveat to declare. The moments leading up to and after a Fed announcement can exhibit a lot of drama and chaos. Only those with a clear grasp of the risks and plan to deal with them (i.e., smaller positions, clear exit strategies, etc.) should participate.

In fact many seasoned traders say sit this one out until a clear direction forms. Kirk says Hang Loose and Wait It Out. Hansen advises to be 'less active until Wednesday'. However Toni describes the typical market reaction to a Fed announcement that prompts us to create a strategy session called, 'The Fed Watcher':

Typically the Fed reaction will be three-fold on two time frames. Initially there is a three wave reaction on the 1-2 minute charts with one move, a counter-move, and then a return to the initial direction. This three-wave activity is then repeated on the 5 minute charts. Often the second move, countering the first, can be stronger than the initial reaction, so it's important to not think that the market has actually reversed and will continue with the trend of the second move. This is rarely the case. I do not expect to do much ahead of the announcement this time around and will likely remain less active until Wednesday.

The Strategy: 'The Fed Watcher: Bulls'

We will model Long opportunities in this window. Try to create the opposite version ('The Fed Watcher: Bears') in another window and display both side by side to get a feel for direction the market is taking.

How Its Modeled:

This window features:
  • The "Unusual number of prints" alert to highlight which stocks are actively being traded
  • The "Strong Volume" alert that is similar to the above alert in that it highlights stocks with a lot of activity but considers volume only
  • The "Large Spread" alert to indicate where trading "chaos" exists and where the market is attempting to compensate by hedging the ultimate direction with larger spreads - it indicates a state of uncertainty
  • The 50 and 20-day moving average crossover alerts indicate which direction stocks may take as they cross significant markers
  • The "25% Pullback from Highs" alert captures the 'counter-trend' that Toni mentioned and offers a good possible entry into a stock that 'takes a breather' before climbing again

These alerts are all subject to the stocks that pass the Trade-Ideas FILTERS. Our trading universe contains stocks greater than $5 trading a daily average volume of at least 500,000 shares. We also filter for only stocks that are trading at the moment of the alert at least 2x their average current volume for that time of day. On top of that we included a Min Position in Range filter set at the 70th percentile so that any good long opportunity happens in the upper 30% of a stock's daily trading range. Also there is a Min Up from the Close filter set to $0.05 so that the stock is at least positive when the alert occurs. The settings for the "Fed Watcher: Bears" are the exact opposite.

Who Can Benefit

Anyone who likes reading the tape and certainly trading the news. This often means short term traders and scalpers.

Footnotes
  • We modeled a similar strategy of interest called, The News Watcher
  • We also have a sample strategy called, Breaking News, that attempts to do the same thing as these strategies. While the alerts may be the same, they are different due to the filter settings
  • 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

Thursday, August 03, 2006

Strategy Session: Gaps Above Previous Days High

NOTE: This post updated 1-1-2007 with the following changes: The Gap Above Previous Day's Highs - market hours Strategy is modified. Only the running up intermediate alert remains and the Min Current Volume filter's new setting is 9x.

  • Here are The Odds Maker results from 1-1-2007 representing the last 3 weeks ending 12-29-2006 if all trades from this strategy are SHORTED: (Explanation of The Odds Maker results)
    267 (winning trades)/ 427 (total trades) = 62.53% down at least $0.01 at the close; Average winner = $0.4956, Average loser = $-0.4296, Net winnings = $64.878, Best = $6.71, Worst = $-2.58; Casino Factor = 99.99%. No new trades are made in the 4 hours before the close.

We received this message on our Support Forum the other day:

How can I set up a real-time gap list? One for gaps above the previous day's high, one for gaps below the previous days low. Can this be done after-market hours and pre-market? A configuration would really be great. Thanks.

... and decided to share the strategies here.

How Its Modeled:

The Gap Above Previous Days High set-up includes several filtering conditions (the Gap Below Previous Days Lows uses the opposite filters):

  • Stock must gap up a minimum of 2x its normal volatility
  • Stock must be above yesterday's high
  • Current volume relative to historical average volume must be at least 2x higher (i.e., 2.0)
The alerts we select as triggers within this filtered universe are stocks that: pullback 25% from highs (possible entry point) OR cross daily highs OR running up with momentum.

The Strategies:

The Pre and Post Market Sessions:

Market Hours:

Who Could Benefit:

Anyone interested in gaps and their opportunities will find these strategies of use. Those that trade the Pre and Post Market sessions will also find these strategies as a good starting point to modify on their own. The gaps are closely watched by many traders - therefore watching these stocks could be an important insight into things to come.

A word of advice: Be wary of the choppy markets in this Summer of '06. Take these alerts for possible short-term longs or consider them as fade candidates. Use your other trading skills of trade management to navigate your way.

Footnotes:

  • Link to other Strategy Sessions.
  • 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.

Wednesday, August 02, 2006

Q & A with the Odds Maker: Beta Release Scheduled for late August

More on the “Odds Maker”:

In the alpha-version, currently undergoing internal tests, the “Odds Maker” is really living up to what we think will be the next big breakthough in the Active Trading space. We know it sounds very boastful but the results we see really make us excited. So let’s share more of our thinking about how the Odds Maker will come to market.

We know there are going to be tons of questions when we release this in beta. In anticipation of these questions we offer you, or blog readers, some answers.

1. Q: If the “Odds Maker” is so good, why are you guys selling it. Why not just use it yourselves and buy an Island?
A: The “Odds Maker” is not a green light – “buy”; red light – “sell” black box system. It does not attempt to predict the future price of stocks. It also does not replace a trader’s ability to manage risk in the form of money management, position sizing, etc. What it does do is help a trader figure out which Trade-Ideas strategy is a high odds strategy of success – one way we define success is a strategy that’s most in tune with the market and demonstrating more winning trades in recent days than losses.

Think of watching poker on ESPN and the ability to see the probablity of what the poker players are holding and who has the better chances of a winning hand. The information is not a guarantee of winning but it does gives you a better idea of what to do – stay in or fold.

2. Q: How far back can you back test the strategies?
A: The Odds Maker allows you to have a system that trades 100 trades a day and goes back approximately 2 ½ weeks. So you could have approximately 1200 trades from which to test and develop a win-rate probability.

3. Q: Is the Odds Maker going to be available on the Web based version of Trade-ideas?
A: No, it will only be available in Trade-Ideas Pro version 2.0.

4. Q: Will there be a trial period to test and evaluate the Odds Maker?
A: Yes, when we initially release the beta version of the product at the end of August, everyone who is a Trade-Ideas customer and who upgrades to the new beta version, will access the Odds Maker for free. Once the Odds Maker is formally released (some time in September), a user will have 10 opportunities with which to evaluate strategies – on the 11th evaluation, they will be prompted to pay.

5. Q: How much will the “Odds Maker” cost?
A: The “Odds Maker” will cost a one time fee of USD $1,100. During the beta period the following discounts are available: For the month of September the price is $900. On October 1st the price will be $1000. On November 1st the price will be $1,100. Payment is possible via these links:
6. Q: How do we find the “Odds Maker” in Trade-Ideas Pro?
A: We did some redesign in the user interface of Trade-Ideas Pro version 2.0 so that the “Odds Maker” will be visible in every window.

7. Q: Why is it so expensive?
A: There’s no comparable tool of any stripe for traders like the Odds Maker. It will be a very disruptive technology. Because of its unique ability to provide long term, continuous improvement to trading performance, there is a one time fee. We believe everyone will feel that the Odds Maker improves trading plans by revealing what strategies consistently make profitable trades.

8. Q: How is the “Odds Maker” different from TradeStation, MetaStock, Wealthlab, or other products that let you backtest strategies?
A: These products generate their share of followers and are good tools for a particular type of trader that prefers creating formulas and programming detailed code with which to test strategy. These tools are difficult to use and frustrate most people who can’t get past the manual. We understand how hard it is to program and backtest. We avoid this approach that uses a micrometer to measure a mudpuddle. The Odds Maker's strength is in its simplicity to use - a design mantra we always adhere to.

Additionally in those products you test 'single securities or complete portfolios'. The Odds Maker evaluates the entire market, meaning multiple stocks at the same time. Right away you will know if your strategy set-up produces high probabilities of winning trades given the current and most recent market conditions.

Finally the way the Odds Maker is priced generates value to our customer. Some of the other products require a subscription to use the service. The Odds Maker is a one-time cost that grows in value the more it is used to improve a trader's performance.

9. Q: What is a good result and what is a bad result in the “Odds Maker”?
A: The Odds Maker evaluates strategy set-ups and returns a number representing the probability that each alert will produce a winning trade. If you can get a strategy over 60% you are definitely going in the right direction. Obviously you want to avoid low odds strategies, but in reality finding a strategy that returns a low probability is actually good because you can flip the direction of the trade (for example from going long to selling short) in the Odds Maker configuration (See Q12).

For example if you find a long strategy with a 20% chance of success, try switching the trade direction and indicate to the Odds Maker that each alert is an opportunity to short a stock. Then see how close to 80% you are. The most significant situation to avoid is a strategy that returns a probability result between 45-55% in your favor. This means that the set-up is too close to a coin flip – you are better finding something else. The Odds Maker will provide additional information such as how many total points were won or lost using a particular strategy and what were the average winners and losers.

10. Q: If I buy the “Odds Maker” and then decide that I don’t want it. Can I get a refund?
A: Refunds will not be available. All users will have ample time to test the new software feature with 10 opportunities to evaluate strategies and decide if the tool is right for them (the 10 evaluations do not expire). If you decide that you want to purchase the “Odds Maker” it will cost $1,100 dollars.

11. Q: If I find a strategy that returns a probability of 65% or higher does that guarantee that I will be right 65% of the time?
A: No, the result is interpreted as follows: based on the current performance and recent history of this strategy as well as the overall market conditions, the next alert from this strategy contains a 65% probability of being a winning trade. Past results never guarantee future performance. The Odds Maker informs a trader what the conditions for a winning trade are given a strategy s/he creates.

Nobody can predict the future, but you can play the odds.

12. Q: What will the “Odds Maker” configuration window look like?
A: The final version is not complete; however, below is a picture of a work in progress.


We look forward to more questions as we get closer to the new software release.


More articles about The Odds Maker:
  • What the Odds Say So Far
  • Is Your Trading in Tune with this Market? It Will Be
  • Strategy Session: Which Strategies Are Most In-Tune with this Market?
  • Calculating the Odds in Real-Time
  • Letter from the LCS: Rewinding the Tape