The power of ADR Filters
I have found a very important filter for scanning stocks that was missing from my process.
Is it better to trade stocks that move a dollar in 3 months or a couple of dollars a day on average?
The answer is certainly easy to pick
We want the stock to have the ability to move.
GAB is certainly a STOCK that I won’t want to trade. Because it fails to pass this test.
it has done 60 ticks (60cents) move since Jan 21. Now again, for spread betting its still 1% profit.
But if you buy the stock shares in a stocks trading account, it will be VERY hard to make money with it. For me, 60 cents mean 1% if my SL was 60 cents. But the stock that can’t move a dollar in 2 months is not really a “hot stock” is it?
But the stock that does not change a dollar or two in the week, is probably not worth it.
Click to See the Full Image: https://www.tradingview.com/x/KcujaidC/
How to Find HOT STOCKS? Stocks that move fast?
We want to trade stocks that have the potential to change its price in a steady manner. There are stocks that move 10% a day sometimes, and then die out.
Then there are stocks that move 1-2% every day in a steady manner. These are the ones we like.
I have found the tool to achieve this. I have added the following filter into my Tradingview.com scanner.
You can find it by searching for it using the terms ADR or average day range. You will find it under the Technicals tab as shown in the image below
I have done some tests and found $2.5 to be a good value. Might change it to $3.5 at some point so that I filter out all the slow-moving ones.
The logic behind this RULE or Filter or Test is that the stock that does not move does not qualify as the “HOT STOCK”. We want to trade stocks that are hot. The ones that have the “investors” and “traders” interest.
So this is perhaps the 10th or 11th filter to our scanner settings.
Let’s have a look at some more examples
In the picture below I am showing GAB again because this is one of the stocks I have traded (unsuccessfully). The setup 1 looks fantastic, it worked nicely. But the change of pice is only $0.60 in 50 days. That is an absolute SNAIL of a stock.
Click to See the Full Image: https://www.screencast.com/t/bvzTEN8NqF7
The ATR Values:
In the picture below you will see the ATR (average true range) of this stock. I have plotted the ATR indicator that is taking values from the weekly chart with a setting of 14periods.
The ATR study reveals that this stock was moving $0.78 at its peak and $0.20 per week at its lowest point.
GAB to OII Comparison, which one is Hotter?
I’m using OII because it’s one of the best trades I have taken this year. I could have taken far better ones, and boasted about it here but sadly I made some rookie mistakes. I’ll call them the initial teething issues. But that’s beside the point here.
In the picture below we have a chart that is slightly better in its “volatility” or Average Daily or Weekly Range. Both charts have elegant pictures. Beautiful setup 1 patterns. However, this one has an ATR (14) of 1.6 and an ADR of 1.02
The HOT Stocks Example $NBR
Now let’s look at a FASTER moving stock.
Again I’m using NBR because I still have a trade running on this in my Stocks Portfolio (not the spread betting account).
What you see in the picture below is a stark contrast. This stock has an ATR of $18 and ADR of $10. It’s gone up from $73 to $129 in a span of 39 days, that’s just 28 bars.
Click to See the Full Image: https://www.screencast.com/t/VpDizTYD
ADR or ATR value Vs % change
But there still a problem. Is dollar value change a good measure?
A stock of $5 might go to $10. That means its doubled in value but the scanner will filter it. You will miss taking trades on a stock like MESA (the one that I actually missed because I don’t know why?)
In the following chart of MESA you see a BEAUTIFUL setup 1 long. But look at the picture on the right. It is the picture of the setup 1 in mid Jan 2021.
At the time ATR and ADR values were not that good.
But then look atthe chart to the left, which is the same chart but it is showin data until the current date which is mid march 2021.
Pay attention to the $ value change and %age change.
The dollar value is
Starts at $7.07
Goes to $15
That is an increase of $8. Which is pretty good but calling it good is underrated. It is actually pretty spectacular because it is >%100 growth.
So this is the drawback of using $dollar value filters. Unless you’re looking for stocks above $30 the dollar value filter will eliminate stocks like these. Is this something you want? Or do you still want to trade under $20 stocks? A question for you to answer.