• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Two Indicators to Improve Your Edge
Stock

Two Indicators to Improve Your Edge

by October 26, 2024
by October 26, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

There are no magic bullets, but we can improve our trading edge by starting our selection process with two proven concepts: trend and momentum. These are perhaps the two most powerful forces in the market. The idea is relatively simple: stay on the right side of the trend and focus on the leaders. This is basically dual-momentum. Starting our process with these two steps will increase the odds of success. We will first choose the timeframe and then select two indicators.

When it comes to trend-momentum strategies, my research suggests that longer timeframes work better than shorter timeframes. This means 200 days works better than 50 days. Short timeframes, such as 20 and 50 days, are better suited for mean-reversion strategies, which trade pullbacks within uptrends. 200 days covers around nine months. This is long enough to absorb a 2-3 month correction and short enough to allow for extended trends.

Next, we need a trend-following indicator. While there are dozens of options out there, a simple 200-day SMA works quite well for long-term trend identification. The idea is to filter out stocks that are in downtrends and only focus on stocks in uptrends (above their 200-day SMAs). Negative outcomes are more likely when below the 200-day SMA and positive outcomes are more likely when above. It is as simple, and effective, as that. 

The chart above shows META with the 50 and 200 day SMAs. In the indicator windows, we can see the Percent above MA indicators, which show the distance between the close and the moving average. META broke the 50-day SMA several times, but none of these breaks resulted in a trend reversal. These breaks simply marked tradable pullbacks within the bigger uptrend. It would have been more profitable to accumulate on breaks of the 50-day as the stock held the 200-day and extended higher.  

After filtering for stocks in uptrends, we then need a momentum indicator to quantify performance. Here again we have dozens of choices. Rate-of-Change is the purest momentum measure and also works quite well. As with the SMA, I will use the 200-day Rate-of-Change to capture long-term performance. We can then rank stocks and focus on those with the strongest momentum.

The CandleGlance charts above show the top performing S&P 500 stocks. I created a ChartList with S&P 500 stocks, viewed the list as CandleGlance and sorted by the ROC(200). This puts the top performing stocks at the top and I can then scroll through this list to create a short-list for further analysis.

This coming week at TrendInvestorPro we are introducing two new rotation strategies using variations of these concepts. These strategies are fully systematic and trade once per week. They are aimed at investors because they trade less frequently than our rotation trader strategies. Note that our S&P 500 rotation trader strategy is up 38 % in 2024. The image below shows the equity curve for this strategy (green line) and buy-and-hold for the S&P 500 (black line). This strategy is up more than 3 times buy-and-hold and the drawdowns are much lower because of the market regime filter. Click here to learn more.

Systematic Strategies at TrendInvestorPro

Rotation Trader for S&P 500 Stocks (+38% in 2024)

Rotation Trader for Nasdaq 100 Stocks (+17% in 2024)

Rotation Investor for S&P 500 Stocks (debuting next week)

Rotation Investor for Nasdaq 100 Stocks (debuting next week)

Click here to learn more and get two bonus reports.

/////////////////////////////////////

You Might Also Like
  • DP Trading Room: Semiconductors – SOXX v. SMH, They’re Not the Same
  • Spot Big Reversals Using the ADX Indicator
  • Week Ahead: NIFTY Stays Vulnerable To Disruption Of Primary Trend; Volatility Likely To Stay
  • DP Trading Room: Six-Month Period of Favorable Seasonality Begins Now!
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Week Ahead: NIFTY Violates Key Support Levels; Drags Resistance Lower
next post
Secular Shenanigans

You may also like

Natural Gas and Oil — Always on the Radar

May 18, 2023

When to Pull the Trigger: Identifying the BEST Entry Point

January 8, 2025

2 Clear Strategies When Using the ADX

October 12, 2023

Market Research and Analysis – Part 3: Market Trend Analysis

March 28, 2024

NVDA Is Not The Only Semiconductor Stock Out There.

August 30, 2024

AU Surges Above Resistance: Here’s How to Take Action

April 1, 2025

Timing the Market With the WillTrend Indicator

September 21, 2023

SCTR Report: Carvana Stock Skyrockets, Hits a New 52-Week High...

October 8, 2024

The EarningsBeats.com Strategy For Uncovering The New Winners

February 11, 2024

DP Trading Room: Shareholders Should Come First

June 5, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Nvidia results spark global chip rally

      May 30, 2025
    • Boeing to resume airplane deliveries to China next month, ramp up Max production, CEO says

      May 29, 2025
    • Nuclear Power Trio: OKLO, SMR, and CCJ in Focus

      May 29, 2025
    • Analyzing SIL, USO, and NVDA: Could These Bullish Patterns Trigger?

      May 29, 2025
    • E.l.f. Beauty to acquire Hailey Bieber skin care brand Rhode in up to $1 billion deal

      May 29, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,764 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,470 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,450 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,429 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,307 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,104)
    • Investing (538)
    • Stock (2,578)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Nvidia results spark global chip rally

      May 30, 2025
    • Boeing to resume airplane deliveries to China next month, ramp...

      May 29, 2025
    • Nuclear Power Trio: OKLO, SMR, and CCJ in Focus

      May 29, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,104)
    • Investing (538)
    • Stock (2,578)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Markets: Recap of This Week’s Market...

    January 11, 2024

    Three Reasons to Consider Gold

    March 14, 2025

    Closing the Potential Gap

    March 15, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here