Narrow down a list

Discussion in 'Trading' started by TradeNYSE, Oct 29, 2007.

  1. I have a trading strategy that scans 500 stocks for buy/sell triggers

    On any given day it can return 30-50 symbols. If I do not have the buying power to take positions in all of these positions...can anyone suggest a way to narrow down the list?

    What do you think about randomizing the list totally and taking a position in the max number I can get into?

    Any ideas would be greatly appreciated.

    I thought about using Beta as a qualifier and only trading the lower beta stocks, but as I posted earlier, I see such a huge discrepancy in the beta values that websites are spitting out.
  2. How about volume? More volume might mean less slippage.
  3. Good idea...let me add something else

    If I get 30 BUYS and 20 SELLS.... it would be a good idea to keep that ratio when narrowing down, right?

    My plan is to hedge the unbalanced side with would you suggest (assuming I want to trade 10 stocks) to:

    A) pick 5 buys, 5 sells, so I am essentially market neutral, or:

    B) keep the trigger ratio, buy 6, sell 4, and sell the SPY (2x) to hedge evenly?
  4. AAA30


    To be neutral you should be more concerned about the correlation between you buys and sells.

    So say if you have a base of 500 stocks build a correlation matrix and test trading the 5 pairs with the strongest correlation and opposite signals.