Using the Trading Trend Quantifier
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The trading trend quantifier enables you to find the three stocks
with the highest profitability and probability out of a large number
of selections. If, for example, you had ten stocks using this simple
method, it is possible to narrow the list down to the top three. The
trading trend quantifier divides analysis of a potential trading vehicle
the following ways.
First, the reward-to-risk ratio is entered in the R/R column. Second,
a trend score is given to each of the potential candidates, along
with the direction of the trend, which is indicated by an arrow up,
down, or sideways. This number and the arrow are placed in the
trend column. Third, all technical indicators are totaled, subtracting
the negative from the positive numbers. The total is jotted down
on a piece of paper. This number represents high-probability buy or
sell signals. Fourth, the trend score and the high-probability score
are added together and the number is entered in the total point
value column. In the fifth and last step, the action column is filled in
with a decision: B = Buy, S = Sell, H = Hold.
High-probability buy and sell signals and their numerical values
are as follows:
Moving averages 12, 20, 50 +1, -1, 0
MACD +1, -1,0
RSI (14) +1, -1,0
Rate of change 12, 26, 39 +1, -1, 0
Bollinger bands +1, -1, 0
Williams % R +1, -1, 0
I suggest you use the trading trend quantifier to input the information.
Place the data in a three-ring binder for easy access and
review. This will become useful in later analysis. (See Figure 3.10.)
After the information is entered into the trading trend quantifier,
it is a simple matter to select the stocks that have the highest
reward-to-risk ratio, trend score, and total score. Note that the total
score is a combination of trend and high-probability buy and sell
indicators. You may enter the information into a spreadsheet to
expedite the process. Using this simple method eliminates emotional
decisions and results in the three stocks with the best potential
out of a list of selections.
The Momentum Probability, Profitability Filter is an excellent
trading strategy. By using this method you are selecting stocks
based on momentum and profitability. This strategy will work well
Figure 3.10 Trading trend quantifier
Trend Score Entry and Exit Indicators
Trendlines +2
Moving averages +3
Support and resistance 0
Chart patterns +1
Volume +1
Total +7
Total score = 17
Moving averages (12, 20, 50)
MACD
RSI (14-day)
Price rate of change (12, 26, 39)
Bollinger bands
Williams % R
+3
+1
+1
+3
+1
+1
+10
in all market conditions because the filter and screening process
will find bullish and bearish momentum acceleration points. While
this strategy works well in bullish and bearish markets, you need
more than one strategy.
The trading trend quantifier enables you to find the three stocks
with the highest profitability and probability out of a large number
of selections. If, for example, you had ten stocks using this simple
method, it is possible to narrow the list down to the top three. The
trading trend quantifier divides analysis of a potential trading vehicle
the following ways.
First, the reward-to-risk ratio is entered in the R/R column. Second,
a trend score is given to each of the potential candidates, along
with the direction of the trend, which is indicated by an arrow up,
down, or sideways. This number and the arrow are placed in the
trend column. Third, all technical indicators are totaled, subtracting
the negative from the positive numbers. The total is jotted down
on a piece of paper. This number represents high-probability buy or
sell signals. Fourth, the trend score and the high-probability score
are added together and the number is entered in the total point
value column. In the fifth and last step, the action column is filled in
with a decision: B = Buy, S = Sell, H = Hold.
High-probability buy and sell signals and their numerical values
are as follows:
Moving averages 12, 20, 50 +1, -1, 0
MACD +1, -1,0
RSI (14) +1, -1,0
Rate of change 12, 26, 39 +1, -1, 0
Bollinger bands +1, -1, 0
Williams % R +1, -1, 0
I suggest you use the trading trend quantifier to input the information.
Place the data in a three-ring binder for easy access and
review. This will become useful in later analysis. (See Figure 3.10.)
After the information is entered into the trading trend quantifier,
it is a simple matter to select the stocks that have the highest
reward-to-risk ratio, trend score, and total score. Note that the total
score is a combination of trend and high-probability buy and sell
indicators. You may enter the information into a spreadsheet to
expedite the process. Using this simple method eliminates emotional
decisions and results in the three stocks with the best potential
out of a list of selections.
The Momentum Probability, Profitability Filter is an excellent
trading strategy. By using this method you are selecting stocks
based on momentum and profitability. This strategy will work well
Figure 3.10 Trading trend quantifier
Trend Score Entry and Exit Indicators
Trendlines +2
Moving averages +3
Support and resistance 0
Chart patterns +1
Volume +1
Total +7
Total score = 17
Moving averages (12, 20, 50)
MACD
RSI (14-day)
Price rate of change (12, 26, 39)
Bollinger bands
Williams % R
+3
+1
+1
+3
+1
+1
+10
in all market conditions because the filter and screening process
will find bullish and bearish momentum acceleration points. While
this strategy works well in bullish and bearish markets, you need
more than one strategy.