Sunday, December 31, 2006

The Best of Trade-Ideas Blog (According to Time Magazine’s Person of the Year)

That "PoP" sound from the champagne bottle is for you dear reader.

As we celebrate what's been accomplished in 2006, we want to wish all readers and subscribers a very happy and prosperous New Year.

Below are links to the posts that received the most views in 2006 - we further edited the list that features strategy examples to those that are currently performing well (as judged by The Odds Maker). Hopefully they will fuel some idea generation on how to take the trades from 2006 to your own next level. If Trade-Ideas and The Odds Maker can help you stick to your trading plan resolutions - your accomplishments will merit many more "PoP"ing sounds next year.

Today covers the first half of 2006, tomorrow we'll cover the rest:

  • Most active traders usually trade in stocks that will get them the most bang for the buck i.e., what stocks have the largest intraday ranges (from high to low) - 3 strategies on how to find them in Trade-Ideas

  • Our method to catch what's moving in terms of volume and price before news gets out

  • When things are in order the Specialist keeps the spread more or less tight. But when something happens that is unusual the Specialist's spread becomes wide and acts as a hedge. It's an indication that something is happening - something you can be alerted to as a possible opportunity

  • Issac Newton's First Law of Motion: Law of Inertia explains the basics of planetary motion, coach potatoes, and our latest Strategy Session: 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

Thursday, December 28, 2006

What else is there to do this weekend? Trade-Ideas Contest

The response to our strategy contest and IPod giveaway is underwhelming. If you thought you'd pass on this contest due to the low odds of actually winning (given the large number of contestant entries), I can assure you this is not the case.

Your odds of winning one of these 3 prizes is very high (and at this point almost assured). This doesn't even consider everything we give to each contestant who enters.

What else is there to do this weekend?

2006 Prizes: IPods and Ideas: A Trade-Ideas Contest

Tuesday, December 26, 2006

Top and Bottom Performing Stocks: Year to Date 2006

The lists below highlight the best and worst performing stocks traded on the U.S. exchanges year to date with at an average daily volume of 500,000 shares/day. There is also a list of stocks that follow a "rule of 3": Stocks that are at least 3% above their 200, 50, and 20 day Moving Average and are up at least 3 days in a row.

Click on the list's title to see and modify the scan. Click on the symbol names to view more detailed technicals on each stock. As of Friday's close from the free research area of Trade-Ideas:

Top Stocks Year to Date
  1. USBE - US BIOENERGY CORP.
  2. ADRX - ANDRX CORP DEL ANDRX GROUP
  3. ENMC - ENCORE MED CORP
  4. CF - CF INDS HLDGS INC
  5. RNAI - SIRNA THERAPEUTICS INC
  6. FSL - FREESCALE SEMICONDUCTOR INC COM CL A
  7. MIK - MICHAELS STORES INC
  8. NCOG - NCO GROUP INC
  9. VTS - VERITAS DGC INC
  10. ISSX - INTERNET SEC SYS INC
  11. REY - REYNOLDS & REYNOLDS CO CL A
  12. TCC - TRAMMELL CROW CO
  13. MYOG - MYOGEN INC
  14. GT - GOODYEAR TIRE & RUBR CO
  15. CNCT - CONNETICS CORP
Bottom Stocks Year to Date
  1. CPST - CAPSTONE TURBINE CORP
  2. AVNR - AVANIR PHARMACEUTICALS CL A NEW
  3. JRCC - JAMES RIVER COAL CO COM NEW
  4. TOPT - TOP TANKERS INC
  5. INSM - INSMED INC COM NEW
  6. IMCL - IMCLONE SYS INC
  7. LSTR - LANDSTAR SYS INC
  8. NFLD - NORTHFIELD LABS INC
  9. ANR - ALPHA NATURAL RESOURCES INC
  10. FMDAY - FUTUREMEDIA PLC SPONSORED ADR
Rule of 3: MAs & Up Days
  1. PSYS - PSYCHIATRIC SOLUTIONS INC
  2. CIT - CIT GROUP INC
  3. PBY - PEP BOYS MANNY MOE & JACK
  4. KKD - KRISPY KREME DOUGHNUTS INC
  5. TIF - TIFFANY & CO NEW
  6. IFX - INFINEON TECHNOLOGIES AG SPONSORED ADR
  7. NTY - NBTY INC
  8. RITA - RITA MED SYS INC DEL
  9. ITMN - INTERMUNE INC
  10. TAP - MOLSON COORS BREWING CO CL B
  11. HIG - HARTFORD FINL SVCS GROUP INC
  12. SKYF - SKY FINL GROUP INC
  13. CRAY - CRAY INC
  14. HORC - HORIZON HEALTH CORP
  15. STEC - SIMPLETECH INC

Thursday, December 21, 2006

When Subscribers Talk: Listen and Deliver


This month marks the end of the second year of this blog. Our first post was in December of 2004.

In recognition of this milestone it's only appropriate that I share with you the details of several new filters that will be operational early next week. After all, these new features and improvements to Trade-Ideas, based solely on the feedback of our subscribers, is one of the common threads of this blog.

Updated: What's Here!

Min and Max Distance from Inside Market

This filter came from institutional customers using The OddsMaker. The filters compare the last print for this stock to the best bid and offer.

If you set the max to 0, you will only see stocks which were trading at or between the bid or offer at the time of the alert. If you set the max to 0.1 you will only see stocks which were trading no more than one tenth of one percent above the offer and no more than one tenth of one percent below the bid.

This separates legitimate prints from bad prints. The further the print was from the inside market, the less reliable the alert is. This is especially helpful when used with The OddsMaker. The OddsMaker uses the price of the last print as the entry price for the trade. This is only useful if this was a print that you could actually get. The closer the print was to the inside market, the more this is as an entry price.

Min and Max Put/Call Ratio

We've long heard the requests from subscribers for optionable stocks. Recent changes to our data vendor and other forces now permit us to deliver the goods.

These filters allow you to select stocks based on the number of puts and calls purchased today. Set the minimum put/call ratio to 3 to see only stocks with at least three times as many puts as calls. Set the maximum put/call ratio to 0.5 to see only stocks with at least twice as many calls as puts.

You can also use these filters to find optionable stocks. If you only trade options, set the minimum put/call ratio to 0. This will show you all stocks which have had any options activity today. If you want to see stocks with no options or illiquid options, leave both of these filters blank.

Min and Max Position in Lifetime Range

I wanted to name these the WallStrip filters but got vetoed (sorry Howard). These filters are indeed evidence that the squeaky wheel gets the oil - one of my personal mantras as a consumer myself.

These filters compare the current price of the stock to the stock's history. This range is fixed at yesterday's close. The range goes back 10 years or the lifetime of the stock.

Select a minimum position of 100 to see stocks which are trading higher now than any time in the previous 10 years. Select a minimum position of 95 and a maximum position of 100 to see stocks trading near that level. Select a maximum position of 0 to see only stocks trading for less than any time in the last 10 years.

All these filters are in the testing mode and the finishing touches will be completed by Tuesday or so next.


Footnotes:
  • No matter which platform you use (e.g., browser, TI Pro, Scottrade ELITE), 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. Instead 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.

Wednesday, December 20, 2006

2006 Prizes: IPods and Ideas: A Trade-Ideas Contest

It's the holiday season and I'm in a giving and sharing mood. So let's give away some goodies and share our readers' favorite Trade-Ideas set-ups. We'll use The Odds Maker to judge whose strategy is winning the most in this market. Here is the prizebag:

The Goodies*
* If you are a prize winner and an Odds Maker customer, you'll choose any 2 of these prizes!

Everyone who enters wins:
  1. An evaluation of your trading strategy using The Odds Maker. We'll help tweak your set-up using this powerful tool to put the odds in your favor. It's a nice way to introduce yourself to The Odds Maker if you haven't tried it yet.
  2. A look at some of the selected entries I'll share on the blog that demonstrates how others use Trade-Ideas to make better trades and manage risk.
  3. All participants who are Trade-Ideas subscribers will receive credit for 50 free uses of The Odds Maker.
The Steps
  1. You don't have to be a Trade-Ideas or Odds Maker customer to enter - but it will help!
  2. Submit your favorite Trade-Ideas strategy to info@trade-ideas.com SUBJECT: Trade-Ideas 2006 Giveaway. You can submit as many trading strategies as you like
  3. Be sure to tell us how you trade this strategy by mentioning if you use the alerts to go Long or Short and under what conditions you exit a trade
  4. Be sure to tell us when you trade this strategy by mentioning if you trade it: during the entire session, after the 1st 30 minutes, only after lunch, etc.
  5. Be sure to tell us the inspiration for this strategy by mentioning where you learned it or from whose original idea the strategy sprang
  6. The last day to submit a strategy is January 1, 2007. The results will be announced January 8, 2007
Leave any questions in the comments section below or at info@trade-ideas.com.

Good luck!

For a list of strategies you can use and pass off as your own, visit either our Samples (online or in TI Pro) or our blog series called Strategy Sessions.

A special hat-tip to Technicator.net for reminding me to do this. Go and participate in his contest and go for goodies!

Friday, December 15, 2006

Daily Ticks: Footprints, Widgets, and MA Crossovers

A list of what's got our attention today:

  • Charles Kirk edited a great series of Qs & As from his readers with Dr. Brett Steenbarger in the members section of his website. Brett describes how he evaluates market conditions throughout the day:
    "I'd suggest that volume tells you what the market's largest and most influential traders are doing. After the open, I'm a purely discretionary trader following volume flow (the distribution of trades at the market bid vs. offer)."
    He mentions Market Delta as a tool to help identify these volume patterns. This can also be accomplished in Trade-Ideas which also has a replay or 'History' feature to see these patterns emerge. Market Delta and Trade-Ideas are complimentary tools that overlap in this one area - compare the two. We built a set-up called, "Volume FootPrints" as a result of the interview.

Have a great weekend.

Wednesday, December 13, 2006

Strategy Session: Take Your Trading to New Depths


A recent conversation on EliteTrader featured an interesting strategy with which I decide to experiment. It's based on an analogy that Dr. Brett Steenbarger and I discussed awhile ago and one that wound up in his recent book, Enhancing Trader Performance (Wiley, 2007) pg. 147
"If the sea life at a particular market depth is not interesting, the [Trade-Ideas] technology allows the trader to move to a different depth and uncover previously unseen life. Just as the military utilizes satellite photography and electronic intelligence gathering for decision support, traders can expand their cognitive capacities with the assistance of such screening tools."
Think of price and when you trade the strategy during the market session as various depths in the sea you would find if you were with Jacques Cousteau, or say on the set of a James Cameron film. The forum discussed a trading preference for a specific narrow band (i.e., depth) of stock price; namely, from $20 to $50. Using The Odds Maker I also concluded the best time to use the strategy was 30 minutes after the open, trading only in the morning session (i.e., another example of depth), and holding all positions until the close.

Here is The Odds Maker readout:
29 winning trades out of 59 total (this is a strategy to assign a sound to and minimize on your desktop - it is not that active) = 49.15%. Winning trades defined as up $0.01 at the close;
Average winner = $0.8341; Average loser = $-0.5228; Net winnings = $9.03; Best = $6.40; Worst = $-2.08; Casino Factor = 83.24%

To undertand what these numbers mean, refer to The Odds Maker manual: http://www.trade-ideas.com/OddsMaker/Help.html

When I started modeling the strategy with an even narrower price range, I surprised myself with these results. Look what happens when I change the price from a range of $20 to $50 to between $20 and $40 - a big increase in the strategy's profitability (achieved mainly by removing a lot of losing trades):








Here is more details on this improved strategy that really just takes stocks in the morning session that are making 30 minute highs, running up, or making new highs on the ask and holding them until the close.

The Strategy: "Long - 30 Min Highs for $20 - $40 Range"

How It's Modeled:

Here are the filters for this strategy:
Min Price=20 (Dollars) Min price set at $20
Max Price=40 (Dollars) Max price set at $40
Min Volatility=1 (%) Min volatility set at 1%
Max Count=5 (Alerts) Max count set at 5

These are the trigger events or alerts that are subject to the filters:
New high ask New High Ask
Running up (confirmed); Filter=3 (1.0 shows the most alerts, 10.0 shows only the fastest moving stocks.) Running Up (confirmed)
Running up (intermediate) Running Up (intermediate)
30 minute high New 30 minute High

Frankly I am not certain how to explain the results. Have I stumbled upon a temporary phenomenon? What makes stocks between $20 - $40 such better momentum candidates than $20 - $50 (and held until at least the close of the day)? Like the ocean there always appears to be counter-currents at different depths. Thanks to The Odds Maker for its ability to see these differences, it appears that this strategy is strong enough to ride for the immediate future.

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

Thursday, December 07, 2006

Strategy Session: As the Market Changes so do the Odds

We are taking a position on the market and backing it up with The Odds Maker.

A couple of customers using The Odds Maker with positive results emailed us separately with interesting observations to share:

#1 The market is efficient
When they find a strategy with a great Odds Maker summary, the market eventually reduces the efficiency of the strategy as more market participants work the pattern or underlying themes within market evolve. For example fading afternoon breakouts may become less profitable if the market exhibits momentum tendencies.

#2 Trading the markets requires the mentality of a pitching coach
Like strategies certain pitchers are called in for specific situations. Strategies that might not have worked before can work now and strategies that have worked in the past may stop working.

We agree with our customers' observations. As a result we are also calling a change we are seeing the markets.

When we initially launched The Odds Maker beta, the market was different than it is today. It was easier to find strategies to fade and to short. Today the better strategies are found on the long side. As an example I would like to point out a strategy that would have never worked even a month ago but is now showing very nice returns.

Strategy Session:

Long 200 Day Highs - Hold till 30 minutes before the Close

How It's Modeled:

The set-up includes these filtering conditions:

Min Daily Volume=100,000 (Shares / Day) Min Daily volume set to 100,000 shares/day

Min Current Volume=5 (Ratio) Min Current volume set to 5 (must be trading 5x its normal volume at time of alert)

Min Count=20 (Alerts) Min Count set to 20 (only report the alert after the 20th instance - to establish a pattern)

and just one alert:

New high; Filter=200 (Days, i.e. 52 week high = 365) New High set to 200 days

Take evolution as another example. You can be successful at what you do and do great for a long time but what happens when things change? Many animals, like the Sabertooth, died out simply because they had done so well, had become so specialized at doing what they did that when the environment changed they simply were not able to adapt, and hence died out.

So went many a SOES traders who knew how to work the system with SOES and SelectNet, but were not able to adapt to a changing market. Today the traders who scalp the NYSE are facing the same situation: Adapt or die.

The Odds Maker is a tool that helps the trader adapt to whatever is happening. A gut check that should tell you to stop what you are doing if it is not working. Don't bang your head against the wall time and time again only to expect a different outcome the final time. That is the mark of insanity.

We will continue to give example of things that are working right now and how we found them using The Odds Maker. We really appreciate all the emails from users to help us see how people are getting results.

Footnotes:
  • Link to other articles about The Odds Maker.
  • 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.

Monday, December 04, 2006

Trade Impact Analysis - How Institutions Use The Odds Maker

We received great insight as to how The Odds Maker is used by some of our institutional customers recently. It is always interesting for us to see the new ways that people use Trade-Ideas software. Understanding how this segment implements The Odds Maker can improve how others use the tool as well.

Institutions like CIBC, Knight, and Jefferies use Trade-Ideas to alert themselves to the best time to enter buy and sell orders in order to beat the VWAP (Volume Weighted Average Price). The VWAP alerts within Trade-Ideas have long been used by these firms. The Odds Maker, however, allows the institutions to perform trade impact analysis - or gauge the trade impact of placing orders at the time indicated by Trade-Ideas software.

How?

Consider the summary The Odds Maker provides. Several institutions refer to the values for the Average Winner and Average Loser as Average Price Improvement and Average Price Impact respectfully. The average winner gives an institutional trader an idea of possible price improvements if they executed orders to buy and sell at the time of the trading above or below the VWAP alerts.

This just goes to show how two different users can apply the same information that benefits each user differently. When we first conceived of the Odds Maker and thought about how our customers where going to use it we always imagined that it was a tool for building a trading system that would compete with the likes of TradeStation, etc.

Trade-Ideas benefits from producing such a unique and niche tool that can satisfy the needs of the retail and the institutional trader as an idea generation, pattern recognition, and risk management tool. Our different customers use the tool in ways never imagined - this in turn helps us develop and strengthen the tool in new and interesting ways.

Thank you to our Institutional Customers!

Friday, December 01, 2006

Quite the Buzz Over at Trader-X

Have a good weekend everyone!

I leave with you a great conversation happening over at Trader-X regarding gaps, Trade-Ideas techniques, and access to a 7-day free trial if you sign up from his site. Good lookin' chap too from his avatar - strong resemblance to that famous actor - what's his name.