Filtering

[the pro]

Hi Guys

Not sure if this is the correct place to post, but seeing as my interest is in spreadbetting, I assume it’ll be okay.

Can I pick the brains of the more experienced amongst you, if I may?

I have developed a trading methodology, which I stick to as rigidly as possible; however some days there are more set-ups than I can handle - 10 or more.

Now in back testing, I never tested or filtered for what I am about to say, but I was wondering if any of you have some experience of filtering for relative strength in relation to the sector against the index and the stock within the sector.

I was thinking of filtering too many set-ups in this way using what I perceive as a logical step. However I have no statistical evidence this will be a positive step. I was thinking along the lines of ignoring set-ups where the sector is under performing and also the stock is under-performing the sector.

Any constructive comments would be more than welcome.

Many thanks

 

[Trader333]

I was thinking along the lines of ignoring set-ups where the sector is under performing and also the stock is under-performing the sector.

Is this because your strategy is one of buying only ?

 

[the pro]

Is this because your strategy is one of buying only ?

No, sorry should have said reverse is true if shorting (selling).

 

[malaguti]

Hi Guys

Not sure if this is the correct place to post, but seeing as my interest is in spreadbetting, I assume it’ll be okay.

Can I pick the brains of the more experienced amongst you, if I may?

I have developed a trading methodology, which I stick to as rigidly as possible; however some days there are more set-ups than I can handle - 10 or more.

Now in back testing, I never tested or filtered for what I am about to say, but I was wondering if any of you have some experience of filtering for relative strength in relation to the sector against the index and the stock within the sector.

I was thinking of filtering too many set-ups in this way using what I perceive as a logical step. However I have no statistical evidence this will be a positive step. I was thinking along the lines of ignoring set-ups where the sector is under performing and also the stock is under-performing the sector.

Any constructive comments would be more than welcome.

Many thanks

I use the relative strength against the sector to filter my trades both long and short. I can say it has helped in keeping me out of short trades which look like the beginning of new downtrends but then end up failing. So for that reason I continue to use it extensively. I cant give any statistics however I'm afraid.
Just that it has proved to be very useful indeed.
In fact my very first look at trading opportunities comes from the relative strength of the sector to the index, and then the best relative performing stock from that sector before considering any trade opportunities

 

[the pro]

I use the relative strength against the sector to filter my trades both long and short. I can say it has helped in keeping me out of short trades which look like the beginning of new downtrends but then end up failing. So for that reason I continue to use it extensively. I cant give any statistics however I'm afraid.
Just that it has proved to be very useful indeed.
In fact my very first look at trading opportunities comes from the relative strength of the sector to the index, and then the best relative performing stock from that sector before considering any trade opportunities

Hi Malaguti

Thanks for the insightful comment. I think I should take a closer look. I think what you're saying is only short weak stocks in weak sectors and vice versa.

Makes sense

 

[Jason101]

Hi malaguti,

I was wondering if you could share with me what software/website you use to scan down on the relative strengths?
Thank you
Jason

 

[malaguti]

Hi malaguti,

I was wondering if you could share with me what software/website you use to scan down on the relative strengths?
Thank you
Jason

Hi Jason, I use Updata for the time being. however I wouldn't necessarily recommend them to be honest

 

[the pro]

Hi malaguti,

I was wondering if you could share with me what software/website you use to scan down on the relative strengths?
Thank you
Jason

Hi Jason

I use Sharescope Plus for all my trading ideas, not cheap and I don’t tend use a fraction of what it offers, but very comprehensive.

 

[Jason101]

Thanks guys, will take a look.

 

[CityMasterTrader]

Hi Guys

Not sure if this is the correct place to post, but seeing as my interest is in spreadbetting, I assume it’ll be okay.

Can I pick the brains of the more experienced amongst you, if I may?

I have developed a trading methodology, which I stick to as rigidly as possible; however some days there are more set-ups than I can handle - 10 or more.

Now in back testing, I never tested or filtered for what I am about to say, but I was wondering if any of you have some experience of filtering for relative strength in relation to the sector against the index and the stock within the sector.

I was thinking of filtering too many set-ups in this way using what I perceive as a logical step. However I have no statistical evidence this will be a positive step. I was thinking along the lines of ignoring set-ups where the sector is under performing and also the stock is under-performing the sector.

Any constructive comments would be more than welcome.

Many thanks

An interesting idea as a filter to make the number of set-ups more manageable.
However, what about when markets are falling? The stock could be outperforming the sector, and the sector outperforming the index, but all could still be falling. No good for longs.
When markets are rallying, your stock might be underperforming the sector and the index, but it could still offer a fantastic great Risk/reward set-up. A shame to ignore.
It depends if you are following the system blindly or not. If just a filter, it could be a good one. But don’t dismiss ideas too quickly just based on relative strength. Worth double–checking why failing filter.
Also beware sectors being over-influenced by a certain peer which could cloud your judgement on a stock’s RS versus sector. It could flatter or muddy your stock.
A difficult but very interesting on. Good luck.

 

[the pro]

An interesting idea as a filter to make the number of set-ups more manageable.
However, what about when markets are falling? The stock could be outperforming the sector, and the sector outperforming the index, but all could still be falling. No good for longs.
When markets are rallying, your stock might be underperforming the sector and the index, but it could still offer a fantastic great Risk/reward set-up. A shame to ignore.
It depends if you are following the system blindly or not. If just a filter, it could be a good one. But don’t dismiss ideas too quickly just based on relative strength. Worth double–checking why failing filter.
Also beware sectors being over-influenced by a certain peer which could cloud your judgement on a stock’s RS versus sector. It could flatter or muddy your stock.
A difficult but very interesting on. Good luck.

Hi Citymastertrader

Yep, simply used as a filter is the idea, if it's a short set up then the reverse would be true.

Thanks for your input