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> VectorVest and selection of stocks, Some initial thoughts
manuj
post Feb 4 2012, 07:38 PM
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Hi

Someone over in FF asked me my opinion about VectorVest product and its comparison to other services like IBD. Here is what I wrote:


QUOTE
VectorVest:

- It is more of a library of tools which you can use to unleash your creativity and imagination and come up with your own strategies and scans for stocks.
- Since it is so powerful - it does come with a learning curve and you need to spend some time to get used to the software.
- Back test your ideas on past 12 years of data to see what works best under certain market conditions
- Comes with lot of canned strategies which you can use out of the box or modify as per your taste.

IBD:

- Prescribes you a list of stocks e.g. IBD50 which you cannot alter in any way. You have to take IBDs list and apply your criteria to narrow it down to 5-10 stocks you want to buy.
- As far as I know do not provide any back testing capability to see how their lists worked in the past

I think recently IBD has released a software called MarketSmith which is comparable to VectorVest. I do not subscribe to MarketSmith - this is just from their informational web page.


My friend and valued contributor at TT diogenes227 suggested I start a separate thread for individual stock picking in Swing Waves forum. So here it is:

- The very first premise I work with is that no matter what method you use (chart reading, mechanical scanning etc.) you cannot pick winner ALL the time. The least you need is 40% and best one can hope for is 60% (unless you are some sort of market genius)
- Each stock pick is nothing but a ticker symbol as good as the next ticker which will make you money i.e. I do not fall in love with any company or stock in particular
- I tried reading charts and indicators but subjective methods of selecting stocks always skewed my judgement because my bias towards a specific stock always made my readings incorrect.

So in order to come up with an objective strategy I picked up VectorVest subscription and tried learning it. It was a long process but I think the long learning curve does pay in the end. It helps you define your own criteria and come up with a strategy according to your taste.

One important thing about trading individual stocks is that you must marry it with market timing. It could be a crude MA cross over or sophisticated timing strategy. VectorVest does come with some canned market timing strategies. But you can also devise your own.

Once you have the two - market timing and stock picking strategy - then you can use VectorVest to back test your ideas and see what worked or did not work in the past. Thus VectorVest provides you a COMPLETE solution for you to come up with a comprehensive system to trade stocks.

e.g. here are 2 scans I ran today. IF the uptrend continues - you can track the performance of these 2 portfolios until we get a sell signal. Coming up with the strategies took me weeks of back testing. But now to run it on daily basis - takes me 5 seconds:

Prudent Basket Of Stocks:

CODE
HBAN
RF
WFR
BAC
AYR



Speculative Basket Of Stocks:

CODE
HW
AOI
SPF
ZLC
COCO


I hope this helps. If anyone has any questions about VectorVest - please feel free to ask. I am just a happy subscriber not affiliated with the company in any other way.

Thanks
M
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Bernie
post Feb 5 2012, 02:14 PM
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Hello again Manuj,
!. How has vectorvest been in there market bull/bear calls? IBD has been whipsawed a couple of times this year.

2. Was wondering if vectorvest timing would of kept you in on the rightside of the call .

If there timing system was more advantageous?

Thanks
Bernie
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manuj
post Feb 5 2012, 02:58 PM
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Bernie

VectorVest models are all trend following and they do pretty good when markets trend. But not so well in volatile markets.

A qualifier to that statement is that when markets get volatile you can switch to lower timeframe timing models with faster signals to deal with the volatility and you will be ok. Some of the best gains I had were in the ultra-volatile period of Aug-Sep 2011 because I switched from daily to 1H timing model.

VectorVest has 3 timing models out of the box - Slower, Medium, Faster. You can pick either one of them; mix and match them or come up with your own. VectorVest themselves try to invent new timing models all the time and when they find something worth while - they let their subscribers know about it (without any extra costs or up sells).

One important thing about VV (which is similar to IBD) that besides technical patterns or studies they also include fundamental data about companies (Earnings and Growth). So if you purchase solid companies - you are sometimes sheltered from the brutal swings that broader indices experience. But ofcourse it can go the other way as well e.g. an individual stock may experience brutal gaps because of company specific news (But in my experience these are rare).

Overall - there is no holy grail which works all the time. But I think VectorVest is pretty darn good and if applied well can make generous amount of money over a period of time.

So to answer your questions:

1. VV calls have been good if you apply the right timing model in the right market condition
2. I use my custom timing model (which is a mix of VV, IBD, diogenes227, fib_1618 ideas) - and so far it has worked pretty good. I have some personal issues following the model perfectly (read fear and greed). But the model has been pretty good.

Hope that helps.

Manuj
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Bernie
post Feb 5 2012, 10:28 PM
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Yes, Thanks very much!!

Bernie
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