Saturday, March 10, 2007

Another Saturday Another Idea

This one from Joseph -
I like to scan stocks where the 3,5,8 are close to or touching each other.If you look at any chart when one gets a confluence of ma's there is a good probability for a breakout or breakdown.

(ABS(AvgC8 - AvgC5) + ABS(AvgC3 - AvgC5) + ABS(AvgC8 - AvgC3)) / MINC8 TC2007 language


And that reminded me of another method that I read about some years back but never really had a chance to test thoroughly. It comes from Bill William's book - New Trading Dimensions. Now the only reason I am mentioning that is to give props to the guy who wrote the story - the book is a lengthy and costly infomercial for Dr. Williams (PhD) other business which is selling trading training. And that's fine but when you say the "red" line, the "blue" line and the "green" line in your book one would expect that it would be printed in color and not black and white.

Anyway stockfetcher.com permits a displaced moving average (both forward, positive, and backward, negative) and since the text, while not absolutely clear, calls for the averages to be pushed into the future I took that to mean a positive displacement. The filter looks like this =
show stocks where close is between 15 and 35
and average volume(90) > 500000
and dma(8,5) < dma(5,3)
and dma(8,5) crossed over dma(13,8) from below 1 day ago

And the back test yielded a not so bad 65% winners and 82% ROI with a reward/risk ratio of 1.97 which isn't too bad. The net change over 30 days was 3.04% and that suggests that this is a better long term than short term filter.

The output looks like this -


And it doesn't take Superman's xray vision to see that one could use this approach also for finding shorts. Dr. Williams calls this the "alligator". You can also see on this chart the RSI-ATR method in full bloom and that seems to catch these trades a few days earlier than the alligator. Whatever.

Dr. Williams has a number of other methods in his book and I think most of them can be programmed into either stockfetcher or Quote Tracker so maybe I'll do another read and try a couple more.

To give him the full props his url is "profitunity.com" and in the spirit of full disclosure I think that is the stupidest name I've ever heard. But I read this book in the late '90's and haven't looked at it since and I remembered the name of the site - so stupid or not - it stuck and what more could you want from a name?

5 comments:

Anonymous said...

Marlyn,

Thanks for the pivot point examples and BOB. I never really gave PP that much attention, but now I see things with them that I didnt before. And BOB, I'm seeing that pattern in a lot of charts and it looks good. Once again, thanks for the great blog.


Quentin

Bullish Jim said...

Would you mind sharing the exit parameters you use in this backtest? I always fall short of the ROIs you get and it's gotta be due my exit assumptions.

You have a fertile mind, my friend.

Marlyn Trades said...

Try these -

Start date: 10/06/2006
End Date: 02/07/2007

Exit Trigger #1: close 1 day ago > close 2 days ago
and close > close 1 day ago

8% stop loss

Advanced Options
Selection Method: Select by volume descending
Entry Price: open
Exit Price: Close
1 trade day
maximum 4 trades

Bullish Jim said...

That's a huge help. I'll try it right now. Thanks.

QUALITY STOCKS UNDER 5 DOLLARS said...

Great idea