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Topic: New Trade Quality Indicator... |
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dan.chapmano3
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Posted on: Nov 18, 2003 - 9:48pm
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Trade Quality Indicator
*** Disclaimer:
[ You understand and agree that these help pages and movies are for educational purposes only and before any trading one should ask advice from a registered investment advisor. You also completely agree to the disclaimer terms on the page http://www.stockconsultant.com/disclaimerpage.html ]
We have recently added a new indicator called Trade Quality
for upside and downside trades.
Trade Quality
from the web page trade quality is defined as:
- Good trade quality is a combination of good profit, target potential, and high profit/loss ratio.
what this means is:
1. Good Profit : Minimum profit of > 9% - 15%+ is ideal for a short term rally or
pullback (to target 1 upside or downside)
2. Good Target Potential: A small amount of resistance (i.e. small number of strong
resistance levels or weak resistance) to penetrate on a move to target 1 is perferred. No resistance on the move to target 1 would provide clear shot and is ideal. This occurs mostly for breakout/downs.
3. Good profit/loss ratio: A good profit/loss ratio along with diversification into
8-12+ stocks of equal dollar amounts should place the overall odds (the house)
in your favor. Good profit of >9-15%+ and low loss of < 3-7% (tight stop limits) will
provide profit/loss ratios > 2.5 :1 , > 3: 1 is considered good.
Following good profit/loss ratio rules should provide a solid foundation to an overall
trading system. More details will be available in future help pages.
Special note on Breakout/down Trades:
Trade Quality listed is only for the standard upside/downside trade,
NOT the breakout/down trade.
For a Breakout/down trade the profit/ratio is relaxed slightly since you have
stock momentum in your favor, target potential is by default great (no resistance)
and for breakout profit targets you should still aim for > 9-15%+ profit.
Dan
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awinters1p1
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Posted on: Jan 19, 2004 - 7:15pm
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If a stock is e.g., 85% bullish indicators and 15% bearish indicators, how is it that it can have e.g., 90% upside trade quality and 90% downside trade quality? Is one a short term indicator and the other an intermediate term indicator?
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dan.chapmano3
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Posted on: Jan 22, 2004 - 5:46pm
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The Trade Quality indicator is sometimes separate from the bullish and
bearish indicators. The Trade Quality depends on good profit, tight stop limits (good profit/loss ratio) and low resistance to the target (good target potential).
The only link between the Trade Quality and bullish/bearish indicators
would be the Overbought/sold (and short term direction) indicators
as these would affect the Target profit and hence lower trade quality (and
profit/loss ratio).
Usually these should be looked as loosely linked indicators. First is the trade looking bullish, ie. for long trades: is there a breakout, at support, upward trend, not overbought, no excessive month trend etc...
Then to the trade quality: is there good profit to the targets, can a
tight low loss stop be had (high profit/loss ratio)? and is there little
resistance towards getting to the targets?
I'll be posting more on this topic in the up coming revised help pages.
Thanks,
Dan
**********************************************************************************
Disclaimer: This is NOT investment advice, just general help and
Dan Chapman's opinion, please check with a registered investment
advisor before making any trades or investment decisions. This
document may contain errors.
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