So for the last couple of months, I’ve been working on creating my own personal screener (methodology placed under a header in the methodology heading, should anyone want to look further), that I thought I may as well share with the all wise and seeing T212 community
Methodology/Score Calculation
Average Score
To get the average score, I use a method based around the Ichimoku cloud calculation (Ichimoku - Investopedia)
I have collected the historical WEEKLY data over the last year for every stock.
Weekly data has been chosen to provide a greater base of reliable data, the final figure is collected after the close of the market on Friday, according to the Excel Stock feature.
The calculations include
The Conversion line: The highest, and lowest values, in the last 9 closing periods, divided by 2
The Base line: The highest and lowest values, in the last 26 closing periods, divided by 2
Leading Span A: The Conversion + Base / 2
Leading Span B: The maximum and minimum value, of the last 52 closing periods, divided by 2
In comparison to the traditional ICHI calculation, I have omitted high and low intraday figures.
On a chart, the presence of Line A, and Line B would produce the basic cloud image. We are predominantly looking for stocks with a price that is above the cloud.
The highest figure of the two spans (the top of the cloud), is then used, with the current SP to calculate an average (e.g if the SP is 10, and the highest figure of both A/B is 5, then the average is +100% )
Trend score
If the figure of Leading Span A is above B, we are saying the trend is UP, and if it is the opposite, we are saying the trend is DOWN. A holding that is in an UP trend is given an additional small score, over a holding that is in a DOWN trend.
So its the Average score + the RSI score + the Trend score, that gives the final score, note this is universal for all sectors
RSI Score
The RSI is calculated using the standard RSI method, over 14 previous periods, with the score being calculated in relation to the RSI figure of 70 (overbought)
E.g A holding with a RSI of 70 is a score of 0, while a holding with an RSI of 30 scores 0.57. Anything above 70 is given a minus score.
All rebalancing, will be consistent and will be conducted on the open of the relative Monday morning, this allows the decision making to be made consistently.
Issues
Volume/Liquidity
Some stocks that are going to place high on the rankings, don’t have fantastic volume/spread characteristics, I will need to make decisions on whether to buy certain holdings, on this metric.
I am not trusting the system blindly, each decision will be looked at further.
I also want to avoid using these metrics in the score calculation for now, as I am wary of putting too many variables in play
Fractional capabilities
T212 is not quite there yet with all of the holdings being fractional, and thus going in the pie, so hopefully as time goes on, this will only improve.
In addition, all orders will be market orders.
Methodology
It is not mathematically pure, of that I know. Please feel free, if you think of anything that can help or assist to make the methodology more reliable, but this an admission, that mathematically perfect, is it not.
Nature of the Stock Market
The nature of the market, any external factor can throw everything off course within a moment,
It also must be noted, that as soon as the market opens on Monday morning, the data loses its 100% accuracy, as such this is why data is collected and confirmed on Friday, and looked at over the weekend.
FX
All US stocks are subject to fluctuations of the FX rate
Measures of Success
I am simply looking to be profitable every month, and keep losses inside low % ranges
Any profit made at the end of the cycle, will be added into the pie on rebalancing.
The screener was designed to rank and weight stocks based on Growth, and Relative Strength, so that I could implement both mid-long term strategies, and short term (swing trades). I can filter between the two if needed.
Mid-long term
I’m looking to create pies with specific sectors that have a healthy % of promising growth in the figures, in which I have done in the US Tech, and Financial sector, to positive success so far, very early days though! I’ve shared the links below.
To start a pie, I’m looking primarily for + Growth, holdings that are trending UP, with the average RSI below 70 (as an entry point!). There is no maximum amount of holdings, I will fill the pie with as many of the qualifying stocks as I can, up to the 50 permitted. I’m still experimenting in regards to balance %.
I don’t have any LSE pies at the moment, but am looking at Tech and Consumer sectors, as potential in the future, or even potentially a ‘LSE PIE’, in its entirety.
I will aim to review, rebalance and update each Pie on a monthly basis.
Short-term
I’m looking for edges in regards to stocks that have positive growth, but have fallen in regards to the RSI index indicating that there may be an opportunity for a reversal,
You will notice I’ve omitted healthcare completely, as I’m not sure this is the right strategy for the majority of that sector, at the moment, I may run more tests.
I’ve also combined some sectors to add balance (i.e Communications and Utilities, Industrials and Materials), due to depth of the exchange.
I’m just sharing LSE stocks at the moment, to avoid clutter, but can share relative US tables, if requested.
As always, further research/decisions will be taken before investment, I’m not going to blindly trust my own system. Nothing posted is advice!
All opinions and ideas are welcome, share thoughts about certain stocks, or what you feel the positives/negatives of the system are.
Current pies - 1 week old
US TECH - equal balance: + 6%
www.trading212.com/pies/l79z8GBLgq0X2ERcRXaXSUSSMcld
US FINANCE - split balance: + 0.92%
www.trading212.com/pies/l79z8GBLgq0X2ERcQpySz6qhU5n0
Tables to follow (next post)
