NEWS Sept 27 2009

NEWS Sept 27 2009
Stock Trading Strategies using Stock Price Volatility Indicators

SMK’s news for today Sept 27 2009 looks at two stock price volatility indicators along with their associated stock trading strategies:

• High Low Gap found in the Daily Historical Metadata Detail report
• Total Profit for Day appearing in two places in both the
  15-minute Metadata Detail and 15-minute Metadata Summary reports

High Low Gap

This is one of the easiest indicators to understand. It is simply the difference between the highest and lowest trading prices for the stock during the day.

When stocks are volatile, the value in this field tends to increase. And depending upon the price of the stock, it indicates potential trading opportunities as oppose to investing opportunities.

For example if shares of company X trades between $5.00 and $6.00 for a difference of $1.00, based upon the low price this shows a volatility-ratio indicator of 1 to 5. The lower the ratio, the greater is the opportunity.

When scanning down the High Low Gap column in the Daily Historical Metadata Detail report, if the values continue to be similar or increase in value over a period of time, then the overall volatility-ratio during that time is high. This presents potential money-making opportunities for individuals trading this stock.

Total Profit for Day

This indicator appears in two different sections of the report, Long Position and Short Position. For reports where the Total Profit for Day indicator appears, all calculations are based on the assumption that transactions are being executed for a block of 1,000 shares.

In the Long Position section of the 15-minute Metadata Detail report, this Total Profit for Day value is calculated by adding the amounts appearing under the Profit or Loss column for each day in that section of the report.

In the Short Position section of the 15-minute Metadata Detail report, it is also calculated by adding the amounts appearing under the corresponding Profit or Loss column for each day in that section of the report.

The 15-minute Metadata Summary report is a synopsis of the 15-minute Metadata Detail report. It only shows the row of information for the final trading period of the day.

Here’s how to take advantage of market conditions and use a strategy that works.

Much like the High Low Gap indicator of the Daily Historical Metadata Detail report, the value in this field tends to increase when stock prices are volatile. And depending upon the price of the stock, it indicates potential trading as oppose to investing opportunities.

The difference is that this indicator tells you the maximum value of any profitable opportunities that can be realized during each of the twenty-six 15-minute trading periods of the day.

For long positions, the strategy used is to reduce risk by executing a trade (buying long) only when the current lowest price is less than the previous lowest price. Then if the stock cannot be sold for a profit at a higher price during the current 15-minute period, there usually is another opportunity to do in the 15-minute period that follows.

The maximum potential profit of these opportunities for each 15-minute period appears under the Amt meeting criteria for 15 min column. The total for this column for each day shows up under the Total Value of these Matches for Day column. This is, in fact, the potential maximum profit for the day using this buy-long strategy.

Now for short positions, the strategy used is to reduce risk by executing a trade (selling short) only when the current highest price is greater than the previous highest price. Then if the short sale cannot be covered at a lower price which results in a profit during the current 15-minute period, there usually will be another opportunity presented in the 15-minute period that follows.

The maximum potential profit of these opportunities during each 15-minute period appears under the Amt meeting criteria for 15 min column. The total for this column for each day shows up under the Total Value of these Matches for Day column. And this is, in fact, the potential maximum profit for the day using this short-sell strategy.

Click Here to go the Stock Metadata page and see examples of this strategy at work along with estimated potential profits made when trading stocks of selected companies. Pick a company that’s featured there. Then go to the reports and examine the contents using the information shown above as your guide.

You’ll be amazed at the money to be made with these strategies using the High Low Gap and Total Profit for Day indicators.

But before spending a cent, try these strategies out on paper first. When you get the hang of using them, open a virtual account on updown.com to determine if they work for you. And then if you’re convinced you can succeed, you have the option to test them out in the real world.

Good luck!

Have an opinion? Click Here and leave your comments.

Prior SMK News

Click on any of the following to read the news of that day.

1. NEWS Sept 25 2009 List of Stock Metadata Reports is Growing!
2. NEWS Sept 20 2009 Number’s Don’t Lie!
3. NEWS Sept 18 2009 SMK’s Blog Has Started
4. NEWS Sept 15 2009 Links to Google, bing and Yahoo! working at 100%
5. NEWS Sept 14 2009 We are at #1

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