Share Trading and RANK%Major v Minor questionsLet’s remember the MAJOR questions of share trading and not be sidetracked into the chasing answers to lessor questions.
1) The major question: What is the best company to buy (CHOOSE)?
2) Lessor but still important questions:
When and how do I buy the best stock (BUY)?
When and how do I get out of the stock (SELL)?
3) Other questions that arise appear to me to be minor in nature.
The ProblemI would argue that many of the principles, methods and techniques are ways to help answer question category (
2) above, rather than (
1).
This includes all the “graph me a stock” add-ons such as moving averages, levels of resistance and support.
The SolutionIn response to the lack of a clear approach to answer the major trading question. Embedded in this search is looking for the stock that will approach the market best growth.
Here is where we start getting into the subject nature of each trader.
By applying a simple hard number that not only shows the way a company has competed in the market for a single day but also allows the comparison across other days, we provide the trader with the bare basic metric to allow the applying of whatever criteria is needed. Some investors will chase the high scores, others chasing the low scores.
Percentile ScoringA percentile is often used in the academic world in relation to students scores in tests. The definition is a percentage of participants who score the same or less than the student in question (including themselves). The value ranges from 1 up to 100.
A score of 90%, says that the student is inside the bottom 90% of all students.
What’s wrong with a percentile?This method of statistics reacts to the particular nature of a specific exam. It is not transferable to another exam day.
The problem comes to light best when looking at those that share the bottom score for the day. If 50% of participants share the lowest score the percentile of each of them is 50%.
These bottom scorers are now not comparable to an exam the next day where only one participant obtains the lowest score, whose percentile would then be 1%.
If you want to track the lowest scorers across the last 5 years, some adjustment of this percentile is required.
A percentile is a means of measuring an upward, or one way progression. It does not serve when analyzing the downward direction.
RANK%Is the OzSuper name given to this variant. After applying a normal rank of companies in the market for a single day, and redistributing these values into a range of 100% down to 0%, where the top ranking companies share a value 100. The lowest ranked share a value of 0.
These scores are now comparable across trading days. A company having a value of zero automatically means it’s on the extreme of the scale for that day.
We now have a hard number for how a particular company did in comparison to all others for that day.
What it does NOT do
Important to keep in mind is that this value is not tracking the amount of growth for a company, but the competitive nature of it’s growth.
Best example to illustrate would be:The worst trading day where all companies loose. The best gainer (or in fact “the least looser”) would be given a value of 100. It is the best in the market for that day, even though it lost money also.
What is INCLUDEDThe measure is the ON-Market growth for the company on a single day in comparison to other companies.
What is NOT includedAny OFF-Market growth is NOT measured. Changes in price between CLOSE and the next day’s OPEN price.
Remember RANK% is not growth, but comparison of growth in the market.
As you surf www.OzSuper.com look for the new RANK% value as a guide when reviewing which stock is "BEST".
