Building Your Trading Stable...The RAMOUTAR REPORT, vol 5

Discussion in 'Psychology' started by RAMOUTAR, Jul 29, 2003.

  1. Building Your Trading Stable, and Cutting Down Your Scanning Time. The RAMOUTAR REPORT VOL. 5

    Previous reports:

    Volume 1 – “Fear and the Market”

    Volume 2 – “Switching TimeFrames”

    Volume 3- “Elements For Successful Trading”

    Volume 4 – “What Are YOU Looking At?”

    To reiterate the disclaimer:

    The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.

    This report was inspired by a reply to a member’s question…
    “Hi Jai,

    As I understand you don't use scanning s/w like TC2000, Metastock, Advanced Get etc.
    What is your criteria for scanning stocks?
    And i am talking only about swing trading.


    …and I have been asked several times discuss how I select and scan stocks. I have put it into this format since I believe it can benefit many of you. This report while not addressing strategy gives a very clear explanation of how I build and run the stable.
    For those of you that have PM’d me, I apologize for not getting back to you right away. There have been many, and I’m catching up. Feel free to send a PM, I answer everyone.

    I have attached a spreadsheet, which contains the NDX 100 components. The fields I will reference in the spreadsheet are:

    Last, % Weighting, Days Range, Net, Volume, Avg Volume and 52 week range. While this information is readily available throughout the day when trading, having it in a simple hardcopy spreadsheet allows me to be focused on the information I’m interested in, and nothing else. That little exercise really helps the discipline too. Working in an xls also allows you to manipulate and prioritize the information in any way you wish. I’m not a MSFT wiz, but much can be done with this format. For example, I had one of my nephews setup an Access DB using this info. Periodically throughout the day and week, I enter my scan results to the DB, and during the day I type in a symbol and all of the information is right there. This information is very helpful and perhaps because it’s in a raw form, it helps me focus. I have cut down my scanning time from 3 hours to 45 mins doing it this way. Everyone is different, I’m just answering your question, “how I do it”.

    Last – just a reference

    % Weighting:

    the higher the percentage the more likely it is the stock leads the index and does not follow it. I use the NDX as one of my primary internals, I don’t need a stock that leads it, I need one that follows it, that’s the idea of using a leading indicator, right? :) When using this filter you’ll see that you limited avg volume along with the trading range. That’s just fine, the whole exercise is getting a list of stocks narrowed down to your “stable”.

    Day’ Range:

    Is like a micro-beta indicator. Long ago when I just daytraded, I excluded stocks that had narrow ranges, and found myself excluding swing trading opportunities as well. AMTD a stock I trade has a narrow DR, but it’s a great swing stock. If volume tells me nothing about the stock’s temp, the DR will. For example, if a stock normally has a 3 point DR, and its narrowed that can be a technical or momentum tell-tale sign.

    Net- just a reference

    Volume and Avg Volume:

    The first piece of information I look for is volume. I run down the list and take the pulse and temp of every stock. A blind doctor can tell when someone is excited just by feeling their pulse, and check the temperature to see if their sick. I print this sheet out every night (on the back of junk mail that’s blank on one side) and over a glass of wine, go down the list with a highlighter and mark the ones that have an extremely high or low pulse (volume). This is much easier than sitting at the pc initially. Haven't we looked at that all day? I highlight the excited and sick stocks. Stocks are excited / exciting when they stimulate or are stimulated by greed and fear, and more than likely its between those emotions when its sick. The volume differences must punch me right between the eyes. Volume is part of momentum, momentum is a fuel in trading. You can have the best chart in the world, but if the volume is not there the stock is going to take MUCH longer to arrive at its destination, if at all. Volume is KEY!

    52 Week Range

    You can look at the last and compare it to the 52 week high and low to see if its trading near potential LT support or resistance. If I see something of interest here, I give it a once over in the chart.

    That’s the spreadsheet I run all current and potential “stable” stocks through. It’s a pointed, clear and simple, and yet vast snapshot. You know how I am with analogies…an eagle has very powerful eyesight, right? Is that eyesight more effective from the sky or the ground? I say the sky. I look at the big picture, and then soar in. These pieces of information are rudimentary and we see them all of the time, what may not be so rudimentary, is the way they are combined and used to build a stable. All of these components are like pieces to a jigsaw puzzle, together they form an image.

    My swing scans all come from my “stable”, my stable comes from my filtering, I filter the NDX and the S&P 100. From there I highlight the most compelling stocks, I then scan the weekly, daily, 20 day y intraday, and then 3 day intraday. The analysis I perform is all based on strategies that I use, a discussion and topic that I may discuss at some point in the future. With technical and momentum analysis, I have the swing and day “hit list” for the next day.

    I am not averse to the software you have mentioned, they’re some of the industry’s best. However, they just serve no purpose to me in this area. As far as back testing goes, it’s my opinion, the market has is too dynamic and has experienced too many structural changes for the back testing results to be 100% valid. We all struggle as traders, it doesn’t matter whether or not your neophyte, learning curve survivor a $400MM hedge fund manager. From time to time you need to sit back with the pc off, and look at what you really need to look at. “The more you look at the less you see.” Again everyone is different, I choose to focus on a targeted group of stocks, trading the “stock ‘du jour” or a “Haley’s Comet” doesn’t work for me. If you need more information, feel free to ask or PM.
  2. PDF attached.
  3. I initially posted this thread in the Trading Forum, as I felt that was appropriate for the subject matter. It has since been moved, I will not debate or question it.