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I was interested in looking at the charts myself so I did a search at
Purebytes - I did find the post, complete with the image links but
alas the links are dead.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> --- In amibroker@xxxxxxxxxxxxxxx, "eitan_kle" <eitankle@> wrote:
> >
> > Hello Anthony,
> >
> > I find this post very interesting, it seems that the attached
> > pictures are not stored with the post, is there a way to view
them?
> >
> > Thanks,
> > Eitan
> >
>
> Hello Eitan,
>
> In the short term you can pick them up at:
>
> http://www.purebytes.com/archives/amibroker/
>
> There is delay before the current posts are filed there.
> They can be hard to find.
>
> The attachments go to people who receice the forum as mail.
>
> I don't use desktop mail (I use Yahoo webmail for extra security)
so
> in the end I elected to receive messages from this group to my
Yahoo
> box (just to get the attachments and keep the few that I want to
> follow up on).
>
> Select the receive as mail from the options at this messageboard.
>
> brian_z
>
>
> > --- In amibroker@xxxxxxxxxxxxxxx, "Anthony Faragasso" <ajf1111@>
> > wrote:
> > >
> > > Alpha-Beta Trading System (Part I): Trading With A Stock's Alpha
> > >
> > > Relative strength trading can be one of the ways to trade the
> > market for
> > > short-term gains. Basically, the concept of relative strength
> > trading
> > > involves picking stocks that will perform better than the
general
> > market as
> > > represented by some Index. Technically a market Index is just a
> > basket of
> > > component stocks, but in reality it is more than the sum of its
> > parts. For
> > > market players, it is a psychological reference, and therefore
> has a
> > > feedback effect. i.e. while prices affect the Index, the Index
> also
> > affects
> > > prices. This enhances the value of relative strength trading.
The
> > two main
> > > calculations required for trading the relative strength of a
> stock
> > are its
> > > Beta and Alpha.
> > > The Beta of a stock is defined as the slope of a regression
line
> in
> > a
> > > scatter graph of paired data points representing percentage
> changes
> > of an
> > > Index and the corresponding change in the price of a stock (See
> > Fig. 1). The
> > > Alpha is the point where this regression line cuts the Y-axis.
A
> > stock's
> > > Beta can be described as that part of a stock's movement that
is
> > influenced
> > > by the Index. And a stock's Alpha can be regarded as that part
of
> a
> > stock's
> > > movement that is independent of the Index's movement. In
> practical
> > terms,
> > > examples of stocks increasing in Alpha could be those with take-
> over
> > > rumours, under strong syndicate manipulation, or having strong
> > expectations
> > > of good results, i.e. factors which make them move more and more
> > > independently off the Index.
> > >
> > >
> > >
> > > Fig. 1. The Alpha and Beta of a stock, where Alpha is the
> vertical
> > intercept
> > > and Beta is the slope of the best fit line.
> > >
> > > Using the Beta to trade is quite common, but not so common is
> using
> > the
> > > Alpha. Actually stock picking by Alpha is a much more rewarding
> and
> > less
> > > dangerous task than stock picking by Beta.
> > >
> > > In our method, we design Alpha for trading very short term i.e.
5
> > days,
> > > screening with volatility and volume condition indicators. The
> > number of
> > > data points used to calculate Alpha is first aggregated in
> clusters
> > to
> > > produce points for percentage changes over a certain number of
> > days. This
> > > results in a very sparse data set, and the regression line
> > is "forced" to
> > > fit these few number of points. The under-fitting is deliberate
> > although
> > > unconventional by statistical theory standards.
> > >
> > > To narrow down the choice, step-by-step filtering is next
> applied.
> > You could
> > > first filter by volatility which can be represented by Average
> True
> > Range or
> > > some other volatility indicator of your choice. The second
filter
> > could be
> > > some sort of Buy*Volume condition, for example:
> > >
> > > H>HY1*V>VY1*L>LY1=1
> > >
> > > which means: High of today>High of Yesterday AND Low of
Today>Low
> of
> > > Yesterday AND Volume of Today>Volume of Yesterday. A third
filter
> > condition
> > > could be that today's Close should be greater than yesterday's
> > Close, i.e.,
> > >
> > > C>CY1
> > >
> > > It is quite up to the individual to specify the conditions
> > according to his
> > > risk profile and his trading style. A totally mechanical
approach
> > would not
> > > be successful. For example on days that the market was down,
> > filtering with
> > > a Buy*Volume condition may not be appropriate. On days that the
> > market was
> > > up, C>CY1 should be part of your filter, the stocks to be
> selected
> > should
> > > have moved up with the market with the majority of stocks. And
> after
> > > filtering you could discard any stocks with negligible Volume
> from
> > your
> > > list.
> > >
> > > Some guidelines for the use of Alpha and Beta in trading are
> given
> > below:
> > >
> > > 1 For very short-term trading, stocks with Beta >1.5 can be
> > regarded as high
> > > Beta stocks.
> > >
> > > 2.Absolute values of Alpha depend on time span of data, and
> period
> > over
> > > which the change is recorded. What is more relevant is the
change
> > in Alpha.
> > >
> > > 3. A stock with high Beta moves up fast when the Index goes up,
> but
> > also
> > > moves down fast with the Index, unless it has a high Alpha
value
> in
> > which
> > > case, the Alpha value acts as a support.
> > >
> > > 4. A stock with high Alpha, but not necessarily high Beta, can
> move
> > up fast
> > > when the Index moves up, if the circumstances for the high
Alpha
> > are still
> > > present or have increased in influence. This can be depicted as
a
> > moving up
> > > of the whole regression line, resulting in a higher point of
> > intercept with
> > > the Y-axis.
> > >
> > > 5. Therefore the way to select stocks is to look for changes in
> > Alpha or
> > > Beta rather than values of Alpha and Beta. The absolute Alpha
and
> > Beta
> > > values only show the status quo. To add an element of
prediction,
> > the change
> > > in Alpha would be more useful.
> > >
> > > 6. It is better to choose stocks with increasing Alpha rather
than
> > > increasing Beta. High Beta stocks with low Alpha values require
> > great
> > > alertness and usually intra-day trading strategies.
> > >
> > > 7. The most potentially rewarding stocks are those that have a
> high
> > Beta as
> > > well as a high Alpha; with the added conditions that these
values
> > have not
> > > peaked,or are already on the way down. This can be confirmed by
> > graphing the
> > > Alpha and Beta values.
> > >
> > > 8. When Alpha and Beta values are graphed, and put on a split
> screen
> > > together with the stock's price line chart, they are seen to be
> in
> > waves
> > > each having a span of between 3-5 days. These waves reflect the
> > inevitable
> > > profit taking. But trends and patterns in the waves can also be
> > seen, and
> > > these can be analysed using traditional technical analysis
> concepts
> > of
> > > trend, support, resistance and divergence. (See Fig. 2)
> > >
> > >
> > >
> > > Fig. 2. The Alpha and Beta values with price charts of a stock
> and
> > an index.
> > > The thicker line is the Alpha.
> > >
> > > 9. Generally, a stock is "in play" when the amplitude of its
> alpha
> > waves are
> > > getting bigger while its alpha value is also trending up.
> > >
> > > 10. Trading short-term with Alpha assumes a trending and
> reasonably
> > volatile
> > > market. In a sideway market, Alpha would not be useful. The
> > determination of
> > > market direction and whether it is in a trending stage can be
by
> > means of
> > > indicators like the ADX and Moving Averages.
> > >
> > > 11. In a down-trending market, you could either buy stocks with
> > consistently
> > > high Alphas for the market's rebound, or,if short-selling is
> > allowed, choose
> > > stocks with high Beta and low Alpha.
> > >
> > > 12. By scanning several markets and seeing which have more
stocks
> > with Alpha
> > > values at the higher end of the market range, it is possible to
> > select which
> > > market to participate in.(A frequency histogram of markets will
> > show which
> > > side the values of Alpha are skewed towards).
> > >
> > >
> > > ---
> > > Outgoing mail is certified Virus Free.
> > > Checked by AVG anti-virus system (http://www.grisoft.com).
> > > Version: 6.0.520 / Virus Database: 318 - Release Date: 9/18/2003
> > >
> >
>
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