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Mike,
That's one way. Actually I use several different types of tests,
filters, or searches (whatever you want to call them <G>) including a
CANSLIM breakout model. I switch around depending on what strategy I
think is working at the time, right now for example I'm using both a
large cap momentum and a small cap Christmas Special type search. I
used to do my searches using Telescan searches which work fine, but
the service was on the expensive side. I dropped Telescan several
weeks ago and switched to QP2 for my quotes. QP2 also has a search
capability, but I'm just coming up to speed learning how to program
them. Right now I'm using both Schwab's search capability which is
free for active traders and Microsoft Investor's Finder search
capability. What I try to do is use a combination of fundamental and
technical criteria to narrow the list of stocks that I might want to
invest in. For my Christmas Special type stocks I use two searches, a
BotFish and a SmalCap search. For momentum type Breakouts I use a
CANSLIM, a FlarOut, and a ValuGro search. I could give the actual
search code, but that wouldn't make much since if you don't use
Finder. Instead I'll just describe BotFish below in general terms.
If anyone is interested, I can also describe the others. When I get
them changed to QP2 code and get them working, I'll be glad to share
them with the other QP2 users out there.
The bottom fishing (BotFish) search begins by eliminating stocks
that trade below a certain price and above a certain price. If I'm
looking at small caps only I usually set that to 3 and 21. It then
eliminates all stocks that are trading above 1/2 their 55 week high.
I'm looking for fallen angels here. To get good fundamentals it then
eliminates stocks that have a price/book above 2.1, a price/sales
above 1, debt/equity greater than 1, annual revenue growth less than
13%, and annual earnings growth less than 13%. Finally to make sure
that there has been an up turn I demand that the three month relative
strength is greater than the six month relative strength. To rank the
remanding stocks I ask for the price.sales to be as low as possible,
the revenue growth to be as high as possible, and the 3 month relative
strength to be as high as possible. I can and do play with the
numerical values from time to time after looking at the results of my
searches. Over time, I've come to believe that low price/sales couple
with no debt is the best basic fundamental search criteria. Adding in
earnings and revenue growth then helps with the final cuts.
Yell if anyone wants me to describe the other searches.
JimG
-----Original Message-----
From: mikelu <mikelu@xxxxxxxxxxxxxxx>
To: 'metastock@xxxxxxxxxxxxx' <metastock@xxxxxxxxxxxxx>
Date: Saturday, November 14, 1998 9:16 PM
Subject: RE: Stock Trading Building Blocks
>I have a question on element 1. I have generally been buying CANSLIM
>breakouts, but ranked the stocks by mainly RS and up/down volume.
I've
>written a simple system tester in quotes plus and was thinking of
using it
>to simulate trading the stock for the last two years and rank the
stocks by
>those results. Is that kind of how you do it? Does it work?
>
>Thanks,
>
>Mike
>
>-----Original Message-----
>From: Jim Greening [SMTP:JimGinVA@xxxxxxxxxxxxx]
>Sent: Saturday, November 14, 1998 4:26 PM
>To: Metastock
>Subject: Stock Trading Building Blocks
>
>All,
> This may be slightly out of scope in that it is a larger topic
>than just MetaStock charting and testing, although that's definitely
a
>good part of it. I thought it would be interesting to share our
ideas
>on the building blocks or elements of a complete stock trading
>methodology.
>
> I have tried to build my own trading system on what I think is a
>logical set of building blocks. The elements of my trading system
>follow:
>1. A systematic method of narrowing the universe of stocks to a few
>potential trading candidates that have certain characteristics that
>have resulted in successful trades in the past. My searches or
>filters use a combination of fundamental and technical criteria.
>2. A market tracking mechanism that indicates when it is OK to enter
>a position and whether that position should be long or short. I use
>trend channels for this.
>3. Tests and a methodology for making the final stock selection for
>new positions.
>4. A money management system that limits overall portfolio risk on
>each new position and tells how large each position should be. I
>won't risk more than 5% (usually 2 to 3%) of my portfolio on any one
>position.
>5. A method for setting stops and targets although targets are not
>always required. Stops should be based on Technical Analysis rather
>than an arbitrary percentage or point move. Stop placement tied back
>to money management can affect position size. Again, I use trend
>channels for this.
>6. An exit strategy. Mine is simple, exit when a target or stop is
>hit.
>
> Does anyone have any comments on the above building blocks? Any
>to add? Do you disagree with any? Is anyone interested into going
>into details on each of the building blocks?
>
>JimG
>
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