Remember when I was trying to identify stocks whose daily price movements were dramatic. Stocks that opened, then rose and/or fell ... >So you could buy and sell on the same day?
>And DSA is the Daily Stock Activity, right?
halfway between the Low and the High.
>Huh? Why not 1/3 or 3/4 of the way between Low and High? Okay, here's my argument: - If I buy at the Open and sell at the High, I measure my gain as: A = (High - Open).
- Or, I may sell at the Open and buy at the Low. I measure my gain as: B = (Open - Low).
- Suppose I measure my total gain as the product: P = A*B = (High - Open)(Open - Low)
- Suppose that Open is somewhere between Low and High, say Open = Low + x(High - Low) where 0 < x < 1.
- Then P = x(1-x)(High - Low)
^{2}which has its maximum value when x = 1/2 ... meaning that Open is halfway between Low and High.
So here's what we do. - Each day we measure x(1-x) = P / (High - Low)
^{2}= (High - Open)(Open - Low) / (High - Low)^{2}. - We hope to see lots of days when this is close to its maximum value of 0.5 ... meaning that Open is often halfway between Low and High.
- We look for stocks where the average value of (High - Open)(Open - Low) / (High - Low)
^{2}, over the past umpteen days, is as large as possible ... meaning that it's close to 0.5.
It also doesn't give extra weight to stock with BIG stock prices. That's important. Anyway, I looked at various stocks and ... >Don't tell me! You have a spreadsheet.
- You type in Yahoo symbols for 30 stocks (in Column K).
- You click a button (called "
**get Stock DSA2s**"). - A years worth of daily stock prices is downloaded and DSA is calculated each day for each stock ... and plotted.
- The list of stocks is sorted according to their average DSA ... and plotted.
- When the downloading is completed, you can move the slider to stare in awe and wonder at each of the 30 stocks.
In the picture of the spreadsheet, it's stock #26: the DOW, with an average DSA of 0.71
Aah, but we ain't talkin' Buy-an-Hold. We is talkin' Buy-and-Sell. >And I click the picture to download? Always. >That's it?
Unfortunately, the above DSA prescription gives more weight to stocks with small (High - Low) variation.
^{2}.
Alas, that'll give DSA-values that depend upon the stock price, so we also divide by Open ^{2}.
That's an interesting one, 'cause look what it picks out: >DRYS? Never heard of it?
>But what if I don't like that DSA formula? What is I'd rather have ... ?
- (High - Low) / Open ... which is the "original" DSA of Part I
- (High/Open)*(Close/Low) ... the product of two imaginary gains: (High/Open) and (Close/Low)
It'd be the gain if you bought at the Open and sold at the High, then bought at the Low and sold at the Close. >Yeah, very funny. Continuing ... before I was interrupted: - (High - Open)*(Open - Low) / Open^2 ... that's the one that picked our DRYS
- ((High - Open) + (Close - Low))/Open ... the sum of two imaginary gains, (High - Open) and (Close - Low), relative to the Open
- (Open + High + Low + Close)/4
I thought I'd toss that in, just for fun. >So what's best? How would I know? However, consider this: Knowing only the Open, High, Low and Close we can't tell which of these occurred: >You don't know which came first, the High or the Low, right? Exactly, so we might consider: - For the first chart, we'd look at (High - Open)*(Close - Low)
- For the second chart, we'd look at (Open - Low)*(High - Close)
>Why not multiply them all together? Uh ... yeah, except we'd have to "normalize" so $100 stock prices don't override $10 stock prices. >Then divide by Open or Close. Better to divide by Open ^{2}*Close^{2}.
But then we're talking about the product of daily changes, like: [ (High - Open)/Open ] * [ (Close - Low)/Close ] * [ (Open - Low)/Open ] * [ (High - Close)/Close ] These may be something like 0.5% and the product of four of these is gonna be awfully small. We should maybe take the 4 ^{th} root of DSA = (High - Open)*(Close - Low)*(Open - Low)*(High - Close) / Open^{2}*Close^{2}
... that'd be the geometric mean, eh?
Okay, let's consider this one:
It also gives equal weight to the Open and Close. It also ... >So how does it work? Does it identify stocks that have the property you want? Here's an example: >Is that DRYS ag'in !?
Looks like it, don't it? Here's another ingteresting formula:
On the other hand, suppose you |