7/1/12 Stock Relative Strength Scan

[dc]O[/dc]ne of the challenges facing stock traders is knowing where to focus your attention. In a universe of roughly 7,000 names, with maybe 2,000 of those traded actively, how do you know you are finding the best opportunities? Too often, people focus on what is in the news, in social media, names in which they once had big winning trades, or what is generally “hot.” While this can work, it’s also good to sometimes use some quantitative tools to make sure you’re not missing anything.

So, I am sharing (as a one-time thing) my relative strength scan of the entire tradable stock universe. That universe is first screened for liquidity and volatility, then is ranked by my relative strength measure (which is a weighted average of returns over several time windows, emphasizing recent changes while preserving a “memory” of distant price changes), and a certain percentile slice of the top-ranked names is presented in the attached spreadsheet. Be aware that this is a purely quantitative scan so it includes many takeovers, etc. that you will want to filter manually.

I go through a scan like this at least twice a week, with another look at a selected universe of about 500 names that I cover daily. This is one possible solution to the problem of finding good candidate names for trading.

Relative Strength List in Excel Format



Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.