WHAT STOCKS WORK BEST IN TACTICAL TRADING?
Theoretically, the Tactical Trading System (TTS) can work on all stocks at all times. However, selecting quality stocks combined with acceptable volatility clearly stacks the odds in your favor.
The most efficient method of searching for stocks to trade in TTS is to screen on select criteria. This can include strong fundamentals, earnings growth statistics, analyst opinions and more. This step should also include filtering for a stock price range that fits your available capital.
Minimum stock price is important, $5.00 per share is suggested. This will help keep you away from illiquid stocks, penny stocks and stocks that have little demand.
Maximum stock price is limited by how much trading capital you have available. As of this writing most quality names are trading at $200 plus per share. This means that using a shares per series number of 100 and a series of 1,2,3,4 your opening trade cost is $100,000. TTS is aware of this so the system allows adjustment of the shares per series to accomodate most every trader’s budget.
It is further recommended to screen for liquidity. Look for the 30 day average share volume to be at least 50,000 shares traded per day.
Beyond fundamentals you should also screen for technical analysis. A basic rule is to not buy stocks where the 50 day moving average is below the 200 day, so screen those out. Recent gaps up in price tend to revert making these stocks too risky. Wait for the pullback.
Trend is important. TTS excels using stocks that are in a modest uptrend, greatly outperforms on stocks moving sideways, plus can capture profits even in slight down trending markets. MACD and Bollinger bands are great for assessing a stock’s current trend status.
You now should have a basket of 200 or so stocks to consider trading with TTS. The system thrives on price volatility. A good cutoff here is to screen out stocks with less than 30% 1-yr volatility. This will bring your basket down to around 50 stocks to consider at this point.
TacticalTrading.com has research tools specifically for reviewing stocks from the perspective of volatility. See the Volatility page, Simulation page and the Charts page, as well as their respective tutorials. This should be your last step prior to loading a stock into TTS.
In summary, you are looking for stocks with strong fundamentals, acceptable technicals and most importantly adequate, but not too much, volatility.