At InvestExplore, our mission is to help individual investors and traders succeed.
Every InvesTrak - E-Newsletter monthly edition comes packed with plenty of ideas for passive and moderately active investors. These investors may or may not be tracking the market from a trading perspective.
But, we realized, we needed to provide active position traders and investors additional support to be on top of market action and glean more actionable ideas. To cater to this active group we have now launched these
three powerful technical tools:
- Relative Performance Watch Lists
- At-a-Glance Charts
Active Traders and Investors can employ these three effective tools in a disciplined way to spot interesting and powerful long side Stock and ETF ideas.
Every member can add up to 3 watch lists and each watch list can contain 25 securities. This, we believe, is exhaustive for most traders and
investors to zoom in on without getting distracted and still be on top of market action and find interesting ideas.
So, how can traders and active investors go about taking maximum advantage of these tools? Read on below for our step-by-step take on using these tools.
Step 1: Build Your Master List of Stocks in Watch List #1
To start with, identify and build your top set of stocks you want to keep an eye on. These stocks could be the ones you are very familiar with,
had a recent news event or fundamentally strong and probably still in a technical consolidation. This master list will help you stay focused.
Step 2: Build Your Master List of ETFS in Watch List #2
As ETFS are broader indexes, you can choose to add a representative list of ETFS which could be providing exposure to broad asset classes
or specific sectors. You can even add in some international ETFS to build your master list. Most importantly you can add the SPY and
ACWI - the two broadest equity market indexes - so at any point in time you can see how your other selected ETFS are showing price changes
relative to these broader indexes.
Step 3: Review RS1, RS2 and RS3 values in Both Watch Lists Consistently Every Few Days
This is the most important step in the process. We update prices everyday, so you can review both watch lists to see how these securities are showing
relative price strength versus the broader market. The RS1 and RS2 and RS3 values are unique in the sense they are average relative strength values
calculated across three different distinct time periods. Stocks or ETFS showing RS1, RS2 and RS3 values above 80 mean on average they have outperformed
80% of the stocks in our database over three time periods.
At any point in time stocks and ETFS which show ascending RS1, RS2 and RS3 values indicate their relative strength is improving. RS3 considers a shorter time frame
whereas RS2 looks at an intermediate timeframe. RS1 looks at a longer time frame.
Step 4: Check TradeSpotter TFF Values on Interesting Ideas
From the Watch List Display, you can click on the symbol on the right to invoke our unique TradeSpotter tool which calculates a TFF (Trade Favorability Factor)
value for that security. We apply financial technology using powerful technical analysis to calculate the TFF considering these three main factors:
- Technical Price Trend
- Supply & Demand based on Price and Volume Analysis
- Relative Price Change with reference to a total market index.
A TFF value can range between 0 and 1. The higher the TFF value the higher its trade favorability for long side action purely from a technical perspective.
A TFF value of 0.99 or 1 signifies very high technical strength for long side action but it could also mean a possibility of some profit taking event to occur.
The TradeSpotter tool also tries to ascertain the broader market from a technical perspective and comes up with 4 distinct market states. Indeterminate,
Positive, Neutral, Negative. Our approach will be to wait to take action if the market state is Indeterminate and completely avoid
long side action if the state is Negative.
Step 5: Scan At-a-Glance Charts for Ascertaining Broader Market Strength/Weakness
Our At-a-Glance charts will help you get the big picture on most US sectors and all broad asset classes in just a few minutes. Strength or Weakness
from a technical perspective can be quickly ascertained to determine which ETFS are showing positive price attraction or not. ETFS from these at-a-glance
charts can also be added to Watch List #2 for tracking.
Step 6: Add Your Actionable Stock and ETF Ideas or Trades in Watch List #3
Once you go through the process of reviewing your stocks and ETFS in steps 2, 3 and 4, your 3rd watch list typically should only contain securities that have high TFF values
and also those which have ascending RS1, RS2 and RS3 values with a high TFF value. These are the securities which, from a technical perspective, are gaining
investor attention now and hence are likely to have a momentum factor advantage.
Step 7: Tacking Action
Our approach to acting on these actionable ideas is based on averaging out the buys at different price levels to build a position as long as the TFF values or RS1, RS2 and RS3 values
are not crumbling. Once a full position is built you can continue to track them in Watch List #3 to plan the exit when the price targets are met.
By the way, this is only our simple and quick guide to effectively use these tools. This approach has worked for us well.
As an active trader or investor you can always experiment and find your own ways to maximize your results. But, no matter what, a disciplined approach to using these tools, in our belief,
can provide a significant edge to traders and short term investors.
If you are not a subscriber, please signup today and take advantage of these powerful tools to get a technical trading edge.
Good Luck and Safe Investing!