Saturday, March 10, 2007

Tips for TradeRadar Users - Filter Settings

A pattern has been developing where TradeRadar generates a BUY signal and then, within a few months, a weak sell signal is generated. The signal appears weak (Signal Strength indicator less than 60% or 70%, Kurtosis not high enough) because the the reversal is not abrupt.

What about those stocks that move up nicely and then run out gas, dropping little by little until the profits are all gone? I have just seen this happen with PacificNet (PACT) and TradeRadar never flashed a solid SELL signal.

I believe the issue here is that the TradeRadar engine generates its best signals when there are more than eight months of daily data available. When you have less data to work with, the solution is to reduce the amount of filtering. The default value is 5 days. Try 3 or 4 days. Not only will the Signal Strength increase, the Kurtosis will also increase. At that point the Dashboard may flash the three green lights that indicate a solid, actionable signal.

As two examples, I have been reporting on Tarragon Corp. (TARR) and the SPDR S&P Homebuilders ETF (XHB). If you analyze the data over the last six to eight months, setting the filter to 2 days from 5 days transforms a weak SELL signal into a very strong SELL signal.

A note about Kurtosis: when there is less data, the peaks tend to be wider in relation to the amount of data in the period. Even though the Dashboard light for Kurtosis is set to yellow, for a lesser amount of data it might better be interpreted as green.

If your gut is telling you that you should sell but TradeRadar is telling you to hang on, try these analysis techniques. After I do a bit more research, I will be getting an update out for the TradeRadar software that will do some of these adjustments for you.



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