Fine tuning | stockbee


Fine tuning

One of the persistent question I get is in any of the method "Double Trouble" or IBD200, the breakout criteria produces many possible candidates for entry daily, so which one should be taken. I alluded to that problem in my previous post " Why choice is a big problem"

When I made the original posts on "Double Trouble" and "IBD 200", it was more broad stroke concept, and I purposefully generalized some rules. To make the concept work you need to get in to lot of microscopic details. Most of those minor adjustments are related to reducing risk or improving your odds of picking the most promising ones or related to tactical entry or exits, or maintaining data, or intra day entries. Now I have answered most of them in comments or in emails. Many of these things are not necessarily in logical sequence.

In order for everyone to benefit from the same, I will sometime later this week rewrite one comprehensive posts on all methods with all the FAQ's after going through all the comments and emails.

Also for next month or so I will detail on every 100% list how I would eliminate the stock and chose few for the day, that way most people can see the logic at work. I use 65 day growth as one filter, total yearly growth as another, and fresh entrant to 100% plus as third. So I try and take a signal in top 20 stock whenever possible ranked by yearly growth. I also try and take one signal from the fresh 100% entrant with breakout and I look for weakness in strong trend (hoping that it is start of fresh leg up)

Now even though I put up the list at end of day, in reality I take many trades intra day. One of the scans I use to find the candidates to enter by 10.30 or 11 A.M. on 100% plus list is :

( 100 * (C - C1) / C1) >= 2 AND V >= 700 AND V > .5 * V1

This scan works only before 11 A.M.

It uses approximately half the values of the final breakout scan:

( 100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1

This way you get to enter early in some breakouts. Which helps you catch part of the breakout day move plus reduces your distance from stops.
Similarly I use the 65 days filter previous night to reduce further the 100% list to monitor. So I run the 11A.M. scan on that further reduced universe.


Tom said...

I look forward to your comprehensive post, especially more detail on how to trade the upcoming earning season.

dave said...

You have been successfully trading these ideas for around 6 years. How are you able to keep investing in these small stocks as your portfolio has grown? I would be concerned about having a small stock move against me and not being able to unload all of my shares in a timely manner.

Pradeep Bonde said...

1 None of the methods give only small stocks.
2 By avoiding likely high risk zones. I use an overall market direction filter. The market monitor methodology is for that. I am aggressive and fully invested only when circumstances are ideal.
3 Risk management at individual position level and at total portfolio level. Bet sizing is key when trading such stocks.
4 By choosing fast moving vehicles and using very tight stops.

Contrary to what most people "believe" stocks do not just gap down significantly out of blue.

Most traders have never consciously answered the question 'how much liquidity do you really need for your total portfolio size?'.

I will have a more detail post about liquidity titled " Liquidity is cyclical" and my studies on liquidity later.

m said...

Since I do not have scan software, is there a good source that I can import into excel that contains all the necessary fields to run the formula in excel?


Pradeep Bonde said...

Will answer all queries tomorrow. Rain is keeping us busy today.