Using the market as a trading factor

Discussion in 'Trading' started by mlsignups, Nov 12, 2005.

  1. I trade mostly equities and have been working continually on building and adapting systems and rules to trade by to remove as much emotion as possible (or all).

    Anyway, I've worked on a number of systems/strategies that obviously do better in some periods rather than in others.

    It got me thinking about whether there were ways to incorporate the market into the system, too. For instance, adding a factor that says only enter these long trades if the individual stock characteristics are met AND the market looks "oversold" in the short term or something similar.

    Anyway, was wondernig whether people that had built their own systems to trade individual stocks short term (1 day to 3 days) and were getting good results typically kept the systems focused internally on the individual stock or whether they tended to incorporate other elements, like the market action?

    Appreciate any feedback.
  2. Banjo


    If you can think of it somebody's doing it, prolly somebody out there with their bowling scores in the eqaution.
  3. dantes


    I would be very surprised if any system could be profitable _without_ a general market component. A very significant part of a stocks movement is just explained by the overall market. It take a very strong stock to go up in a down market.
  4. =========
    About 75 % follow market action;
    so while that doesnt mean a stock is a slave to market action, better have some strong reasons to ignore it.

    I am talking about SPY/SPX, bench mark
    dont consider DOW/DIA much of a market indicator,
    even though many liars in mainstream media pretend it is .

    Do consider DIA some , however & record data on it
    & even more important ,SPY,QQQQ;
    as dantes hinted .

    Wisdom is profitable to direct.
  5. CANSLIM method championed by Investors Business daily does this.