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Stockworm has some amazing capabilities for technical analysis including integration of technical analysis into portfolio management. This post defines Stockworm‘s capabilities and give a road map for the use of Stockworm technical analysis.
definitions
Let‘s start with some definitions, with the aid of a sample chart:
This chart shows several technical analysis features:
- prices – the price of the equity over time, in this case displayed with candlesticks
- technical indicators – lines such as moving averages which are created using price (open, high, low, close) and volume
- trading signals – vertical lines which indicate times to buy (green arrows) or sell (red arrows).
To expand on the above concepts: technical indicators are a variety of lines, derived from price and volume, which have been developed to display various trends for stocks. Stockworm maintains dozens of these technical indicators and we are always willing to add more … just ask!
Trading signals use the trending information from one or more technical indicators to make a decision as to when to buy or sell a stock. As an example, you might want to buy a stock when a fast moving average crosses above a slow moving average and sell (or go short) when the fast moving average crosses below the slow moving average. Trading signals are fully customizable using Stockworm's custom trading signal language.
application of trading signals
There are a number of applications of trading signals in the Stockworm system. These include:
- charting: you can visualize your custom trading signal on a price chart.
- swing trade gains: Swing trading involves buying a stock when the trading signal is in a buy state and shorting the stock when it is in a sell state. Swing trade gains, which are displayed below price charts with trading signals, provide a ‘quick and dirty‘ way of testing the efficacy of your trading signal.
- screeners: Stockworm screeners include a trading signal rule which allows you to screen for stocks which are currently in a buy or sell state, based upon your custom trading signal.
- portfolio management: Stockworm portfolio management strategies include trading signal rules which allow you to specify that, e.g. stocks are added to your portfolio when a trading signal is in a buy state and sold when the trading signal is in a sell state.
getting started
You can easily get started with trading signals by reviewing Stockworm‘s built-in trading signals. Take a look at this list and click on the name of any signal which interests you. You will be taken to the custom signal creation page:
The custom signal creation page has a number of features:
- signal definition: a trading signal is defined using formulas which specify when to go long and when to go short.
- indicator lines: trading signals typically use one or more technical indicators. Any indicator which is used in a signal formula needs to be specified in this section.
- charting – A convenience form is provided so that you jump to a technical chart which includes your signal (not pictured above).
- screener – A convenience form is provided so that you can quickly jump to a screener which uses your signal to screen for stocks in a buy or sell state (not pictured above).
Once you‘ve customized your trading signal, you can use the ‘save‘ link to save the signal as your own, for later modification or for later inclusion in a screener or strategy. To use your signal in a screener or a portfolio management strategy, simply add the ‘trading signal filter‘ rule to your strategy and then use the ‘import‘ link to apply your custom trading signal.
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