Your magical way to evaluate a stock.
- Thread starter Jamie J.
- Start date
There really is no right or wrong answer on how to pick stocks (or anything else to trade), it's kind of a huge grey area -- depending on the person, and what fits their criteria. 
Just make sure it's liquid, has high volume; none of that low volume crap.
You have to study, look/stare at the various trading instruments -- and see what's your cup of tea.
Just make sure it's liquid, has high volume; none of that low volume crap.
You have to study, look/stare at the various trading instruments -- and see what's your cup of tea.
buy the dip in a bull market
sell the pop in a bear market
that's the holy grail of trading
sell the pop in a bear market
that's the holy grail of trading
Jamie,
secret sauce formula (theo)=bid+ask/2. If you think you can do better then think twice.
Very very smart people have been doing this for decades and still with hitting percentages that are hard to be proven to be better than 50-50.
Thank you for the secret formula. Times are changing as well as the market conditions. So I'm looking for good ways to correctly evaluate the stocks.
Pick the stocks that give you the highest System Achievement Scores (SAS).
SAS == 4*k*max[ 0, E ]*PF ,
where
k is the Kelly fraction aka the solution to the optimal geometric growth equation (see below),
E is the expectation (%/100),
PF is the profit factor (see below),
N is the number of trades in the performance evaluation.
The optimal geometric growth equation (ogge) for trading is
0 = sum[ Ri/(1+ k*Ri) ]_i=1toN ,
where
Ri is the return (%/100) of the i'th trade.
In lieu of solving the ogge with an iterative algorithm, here is my current recommendation for a real-world trading fraction:
k ≈ min[ 0.9/max[ .0001 , 2*max[ -Ri ]_i=1toN ] , ½*( new_Kelly_formula ) ]
new_Kelly_formula = max[ 0, s1 ]*( s2*s2 - s1*s3 )/(s2*s2*s2 + s1*s1*s4 - 2*s1*s2*s3) ,
where
S1 = sum[ Ri ]_i=1toN ,
S2 = sum[ Ri*Ri ]_i=1toN ,
S3 = sum[ Ri*Ri*Ri ]_i=1toN ,
S4 = sum[ Ri*Ri*Ri*Ri ]_i=1toN.
E = S1/N.
PF is the ratio of the gain total to the absolute value of the loss total.
PF == sum[ max[ 0, Ri ] ]_i=1toN / sum[ max[ 0, -Ri ] ]_i=1toN
Use N = 40-100 trades for stock picking with a proven trading strategy.
SAS == 4*k*max[ 0, E ]*PF ,
where
k is the Kelly fraction aka the solution to the optimal geometric growth equation (see below),
E is the expectation (%/100),
PF is the profit factor (see below),
N is the number of trades in the performance evaluation.
The optimal geometric growth equation (ogge) for trading is
0 = sum[ Ri/(1+ k*Ri) ]_i=1toN ,
where
Ri is the return (%/100) of the i'th trade.
In lieu of solving the ogge with an iterative algorithm, here is my current recommendation for a real-world trading fraction:
k ≈ min[ 0.9/max[ .0001 , 2*max[ -Ri ]_i=1toN ] , ½*( new_Kelly_formula ) ]
new_Kelly_formula = max[ 0, s1 ]*( s2*s2 - s1*s3 )/(s2*s2*s2 + s1*s1*s4 - 2*s1*s2*s3) ,
where
S1 = sum[ Ri ]_i=1toN ,
S2 = sum[ Ri*Ri ]_i=1toN ,
S3 = sum[ Ri*Ri*Ri ]_i=1toN ,
S4 = sum[ Ri*Ri*Ri*Ri ]_i=1toN.
E = S1/N.
PF is the ratio of the gain total to the absolute value of the loss total.
PF == sum[ max[ 0, Ri ] ]_i=1toN / sum[ max[ 0, -Ri ] ]_i=1toN
Use N = 40-100 trades for stock picking with a proven trading strategy.
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If you plan on doing longer term trading, so like you are using weekly bar charts, might as well start looking at stocks that pay dividends, so if you stock goes sideways for few to several months, it is making something, it is like a little gift without having to do anything other than doing normal research if a stock is poised for move up. Now when stocks are in Bear market, and you are believing that economy and markets are bottoming out OR a commodity is bottoming out like crude oil, copper or coffee, you want to load up on dividend stocks, based on history of paying better than others to make a Core for you retirement funds, if you buy low enough, you might keep them years.
http://www.thestreet.com/topic/47862/dividend-paying-stocks.html
http://finviz.com/screener.ashx?v=161&f=fa_div_o5
OK, this can increase the bottom line as well, but you have to learn about options, so I will dance option plays around the price and trend of dividend stocks, you can do covered calls if you feel the stock is not going to make quick rise up, or sell puts or do put credit spreads when stock going sideways or trending up.
http://finviz.com/screener.ashx?v=161&f=fa_div_o5,sh_opt_option&o=-dividendyield&r=41
So I must have Dividends and optionable on 90% of the stocks I might buy. Only stocks I ever buy without dividends of if dividend is very low are based on commodity prices, like coffee, Crude Oil, Copper, Nat.Gas, I am long them in futures markets so makes sense any new stocks I buy, I be getting in low.
So then I use both charting and indicator that is pretty good for me called "PVT", "
Price By Volume is a horizontal histogram that overlays a price chart. Price and Volume Trend (PVT) is a variation of On Balance Volume, used to determine the strength of trends and warn of reversals." www.barchart.com
So I look for divergences using PVT on weekly bars of stocks that pay dividends and can do options. Now enclosed is a stock I bought 3 weeks ago, I doubt they can pay dividends as they are deep in debt and options are very light volume, but I believe that Crude Oil has bottomed and PVT was showing divergence, so I bought ENBL very low and bought more next week. The 2nd company I bought AT was also based on energies bottomed out, this pays dividends, light volume on options, but Triple bottoms on weeklies are hard to pass up. Huge room to go up.
http://www.thestreet.com/topic/47862/dividend-paying-stocks.html
http://finviz.com/screener.ashx?v=161&f=fa_div_o5
OK, this can increase the bottom line as well, but you have to learn about options, so I will dance option plays around the price and trend of dividend stocks, you can do covered calls if you feel the stock is not going to make quick rise up, or sell puts or do put credit spreads when stock going sideways or trending up.
http://finviz.com/screener.ashx?v=161&f=fa_div_o5,sh_opt_option&o=-dividendyield&r=41
So I must have Dividends and optionable on 90% of the stocks I might buy. Only stocks I ever buy without dividends of if dividend is very low are based on commodity prices, like coffee, Crude Oil, Copper, Nat.Gas, I am long them in futures markets so makes sense any new stocks I buy, I be getting in low.
So then I use both charting and indicator that is pretty good for me called "PVT", "
Price By Volume is a horizontal histogram that overlays a price chart. Price and Volume Trend (PVT) is a variation of On Balance Volume, used to determine the strength of trends and warn of reversals." www.barchart.com
So I look for divergences using PVT on weekly bars of stocks that pay dividends and can do options. Now enclosed is a stock I bought 3 weeks ago, I doubt they can pay dividends as they are deep in debt and options are very light volume, but I believe that Crude Oil has bottomed and PVT was showing divergence, so I bought ENBL very low and bought more next week. The 2nd company I bought AT was also based on energies bottomed out, this pays dividends, light volume on options, but Triple bottoms on weeklies are hard to pass up. Huge room to go up.
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I wink at it from across the room - it winks back - we dance..., the tango.., the dance of love (really we two-step as I am a redneck)
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otherwise....
I know
The volatility my personality can withstand
The movement necessary
The liquidity necessary
The volume necessary
A price thresh hold not to exceed (no need tying up excess capital)
I find one..., trade it till it dries up.., or changes personality - find another..., move on to the next dance partner
RN