The subject of Technical Analysis is a very lengthy because of all of the types of analysis measuring tools and the act of combining them with each other. What this lesson will center on is how to use OptimalTrader to perform some of your Technical Analysis searches. Granted, the primary purpose of OptimalTrader is to find good option trades for situations for a particular stock. But OptimalTrader does have some TA capabilities. Your goal in using TA techniques is to find trigger events that signal a change in direction of the underlying stock or index, to predict where this new direction may hit resistence, and to find the right option trade to match the prediction.
Overview
This lesson will follow these steps:
- Create a symbol list of the most actively option traded stock and indexes
- Perform a search using the MACD indicator for stocks in a new uptrend.
Creating a new symbol list
Although OptimalTrader will store stock and option data for you for any number of symbols that you want, most traders limit the symbols that they use to just a few. It is a good idea to keep option history for a wide variety of stocks, but only watch a few of them. Traders will do that because there is usually enough trading opportunities in just those few to be more than their account size will handle anyway. So our first step is to create a subset list of all of our symbols.
Your first step is to click on the Technicals tab on the top of the page. This will bring you to the following page.
For this lesson, we are going to create a list of the Top 50 Optionable Stocks. Then later in the lesson we will restrict our searches to this list. These symbols should have fairly liquid options with the bid/ask not being too wide. If you would like to get the latest optionable symbol list, go to the Data menu, and select "Download Current Master Symbol List". This is a list of all optionable stocks and is updated monthly. As of the date of this writing, it will download a list of symbols called "Master List June 2009".
So change the upper left part of the page to look like the following snapshot. Select the pattern, "Option Put Call Open Interest", and select a symbol list such as "Master List (month) (year)".
Make sure that the system date on the bottom of the program has a date in which you have data for. So you might want to use yesterday's date, and not today's date unless you are sure that you have already completed today's download. And once you are ready to do so, click on the Find button.
When the search is completed, you can sort by any column by clicking on the top of the column. Clicking a second time will cause it to sort in the opposite order. For this lesson, we want to find those stocks with the highest open interest for today, so sort by the "Total Open Int" column in descending order. Your page will probably look a little different from this unless you chose the same system date that I have.
Now that you have completed this search, let's use the results of the search to create a new symbol list. To start this, begin by clicking on the "Create New Symbol List..." button. A window will pop up asking you for more information. See the example as I have filled it in. Select the radio button, "Create list using topmost...", and enter in 50 for the topmost number. Then give the symbol list a name. When you are satisifed that you may proceed, click on the Create List button. When it has finished, then you will now have a new symbol list. This symbol list may be edited on the Symbols page. As each month occurs in the future, you may want to download the latest master list of option symbols and repeat these steps to create a more up to date list.
Search 2: Looking for MACD crossovers
The MACD and what that is, is beyond the scope of this discussion. But what we are going to do is see if any of our Top 50 optionable stocks had any MACD crossovers today. To do this, the steps are very similar to the first search we did. We are going to select the pattern we are looking for, and select our new symbol list to use
.
For this search, we select Stock MACD, the Top 50 Optionable Stocks, and for the stock price we enter 0. So fill out your page similar to this example and click on the Find button. After you have clicked on the Find button, for the MACD, we require more information. So a window will pop up and ask you for that information. Fill it out just like the sample screen and then click on the OK button.
When we get our results, we click on the last column to see what has been triggered. Running the study for this date, there were only 3 symbols which triggered to the down side and generated sell signals.
Saving the Search for Replay
If you think that you may want to perform this same search, but for a different day, then you may want to save it as a "replay". To do this, click on the "Save Search for Replay" button. The replay will allow you to enter in information to restrict the output to certain keys values and to automatically sort the results for you. For this example I want to create a replay of stocks using the Top 50 Optionable list, that have a value in the fourth column of -1. Fill out your screen similar to this one shown here.
Click on the Save button to save this replay. To test this cool tool, go to the bottom of the program and change the system date to a different date. Then on the upper right hand side of the page, select the "MACD sell" replay in the "Replay a Search" list, and then click the Find button. The search will run using data for the system date selected, and when completed, it will sort the data and eliminate any rows that you did not want to see.
Further Study
This lesson series is designed to give you the basics. It has quickly shown you the fundamentals of how to run a pattern search and to create a replay for that search. If you have further time, you may want to take the results of a search and feed the information into the MultiFind pages to test out a trading theory that you might have. Also you may want to explore the Auto Backtest. This feature adds a lot of sophistication to this program and will allow you to backtest a series of dates and one time and then view the results later.
End of Lesson 4.