Tuesday, August 29, 2006

Trade Ideas Odds Maker

I have been playing with Odds Maker, the latest addition to Trade Ideas Pro software. The feature allows for a quick performance review of your scan. It is also easy to alter the parameters to suit your timeframe of trading, your profit targets, or if you use a stop.

To give an idea as to how it looks, the following is an output for "Stocks Up 5 Days in a row and Continuing higher" (for August 28th). The OddsMaker is a message bar along the bottom of the output table. The output illustrated below used the default settings, showing the returns for a 30-minute period. But this time period can be changed, or analyzed using the closing/next open price. The one thing I am not clear on is how the "Net Winnings" is calculated (maybe David can reply to this?).

Although I am not a daytrader, I tried to see how an intraday scan could be developed using the Odds Maker.

I started with a clean slate, but one could jump in with one of the many settings available.

I set the Minimum Daily Volume to 500,000 shares a day:

and set the min volatility to $0.05

I decided to go with a 30-min opening range breakout scan, by concentrating on parameters defined by morning trading I have more room to play with the Oddsmaker feature.

I then ran the OddsMaker; looking at performance over the subsequent 30 minutes from the alert. Not surprisingly, there was a large number of picks given the broad parameters of the scan. The gains were slight as the performance was only for a 30 minute period.

Setting the Oddsmaker to the closing price, not surprisingly, increased the returns. Stocks opening strong, usually remain strong throughout the day.

Pushing the Exit time to the next day's open further increased the returns.

But if you are trading the opening range you are unlikely to be buying a stock which breaks this range in afternoon trading. So I changed the OddsMaker setting to limit the analysis to stocks appearing on the scan 35 minutes after the open, but 5 hours before the close. I set the Exit time to the Day's close.

No big change given the bulk of the alerts occur soon after the 30-minute range is defined. So I looked at adding filters. First up was the Minimum Current Volume Ratio, which was set to 1.2 (to start with). This did bring an improvement in the returns (again, using the prior OddsMaker settings).

Raising the Min Current Volume setting to 1.5, reduced the net return:

So I kept the Min Current Volume set at 1.2 and factored in a breakout gap. Interestinlgy, adding a Minimum Gap setting of 0.01% gave a nice improvement in Odds Maker performance:

Raising the Minimum Gap setting to 1.0% improved the win percentage to a healthy 65%, but reduced the Net Winnings. However, it also sharply reduced the number of stocks to review - a big plus. The stocks listed in the charts below featured from 10:01am to 10:10 am Monday morning.

On a final note, if one was to hold stocks until next morning, then the Win percentage jumps to 70% and the Net Winnings increases by 50%.

The Odds Maker is a very useful tool to fine tune system. It obviously won't replace real life trading - but it is a very quick way to test the likely returns of a given system. But there is a caveat, from what I understand, the test period covers the prior 3 weeks, so the efficacy of a system will be dependent on what the markets are doing during this period. I wouldn't expect the scan presented here to perform so well if I had done these tests in early May or June.

If you would like to try a full version of the Trade-Ideas software, follow this link for a free 7-day trial.