Strategy Session: 3 Ways to Get More Bang for the Buck

Strategy Session: 3 Ways to Get More Bang for the Buck

Jan 24, 2006

One of the blogs that we include in our “round-up” section of informative articles is Ticker Sense from the folks at Birinyi & Associates. Today they mentioned a trading style that lends itself to several interpretations. That’s a great candidate for a Strategy Session.

“Most active traders usually trade in stocks that will get them the most bang for the buck i.e., what stocks have the largest intraday ranges (from high to low).”

Ticker Sense makes the case that active traders like to trade stocks with enough room in which to maneuver. They produced two lists of stocks at $50 or above with the highest average intraday range over the last 50 days: one list of stocks with rising 50-day moving averages and the other with falling 50-day moving averages.

We came up with 3 strategies that interpret this approach and present them in descending order that most closely matches their list. The last strategy provides entirely new opportunities to consider.

Strategy One: Bang for the Buck with TS’ Symbol List
The best way to match Ticker Sense’s results is to copy it into Trade-Ideas as a symbol list and choose several alerts to assist you in spotting a good entry. Note Trade-Ideas requires that you create the symbol list yourself – click on the strategy without doing so and the alerts will trigger against the entire universe of stocks.

  • Steps on how to create a symbol list are here: (text, video)
  • Alert set-up you might use against this list: Bang for the Buck – TS Symbol List
  • (Note: there are no filters in this set-up because the universe has already been defined by the Ticker Sense stock list. For a recap on the difference between alerts and filters in Trade-Ideas, click here.)

Strategy Two: Bang for the Buck – Rising Above the 50-day Moving Average
Here we measure a wide intraday range not by the high and low of the day but rather the average volatility. Average volatility in Trade-Ideas is determined by the stock’s price average movement over 15 minute periods. In this example we considered the list of stocks with rising 50-day moving averages. You can practice by configuring a strategy that looks for stocks in the opposite direction.

How It’s Modeled

  • Minimum Volatility is set at $0.35 (this could also be expressed as a % of price). This is our method of establishing ‘room to maneuver’.
  • Stocks must be up at least $0.01 from the previous close and at the 49th percentile of today’s range or higher and be at least 0.05% above its 50-day moving average. This stacks the probability that stocks will be in a sustainable upward trend.
  • The set-up uses the same alerts as Strategy One to capture small pullbacks, resistance crossovers, and running momentum as possible entry points.
  • Bang for the Buck – Rising Above 50-Day MA
  • By looking at the History of this set-up from 1/23, several stocks in TS’ list appear (e.g., SNDK, ISRG, RIG, etc.)

Strategy Three: Bang for the Buck – Range Explosions
This strategy uses a different filter to interpret ‘room to maneuver’: Range Explosions. Our Help section describes a range explosion as a stock pattern where a stock’s trading range gets larger every day. A stock’s trading range is the difference between the high for the day and the low for the same day. This set-up tracks stocks in either direction as long as they meet the filtering criteria.

How It’s Modeled

  • The Range Explosion filter is set to look for stocks that have expanded in their trading range for at least 5 days or more prior to today.
  • Stocks must be trading at least 75% of their normal volume or more
  • The set-up uses the same alerts as Strategy One to capture small pullbacks, resistance crossovers, and running momentum as possible entry points. It also looks for broadening top or bottom chart patterns.
  • Bang for the Buck – Range Explosion

Footnotes