One of the common requests we get goes like this. "I want to see different filters in the middle of the day than at the end of the day." There are several ways to do this. They all rely on the seconds_after_open field.
The way some people phrase the question, you might want to use an "if" function. A formula might look like this:
[some basic formula] * if(seconds_after_open <
[early morning], 5, if (seconds_after_open <
[afternoon], 3, if (seconds_after_open <
[the close], 1.5, 1)))
So we broke the day into 4 periods, and we use a slightly different formula at different times. You can do that if you want, but I think this next example is what most people really want.
Let's pick a very specific example. At the end of the day I like to use the volume in shares
filter. But earlier in the day I know most stocks will have lower values. So I want to scale the value in the middle of the day. I like stocks that trade 1,000,000 shares or more at the end of the day. But if a stock trades 500,000 shares in the first half of the day, I think that's about the same. (Or if it traded 250,000 shares in the first quarter of the day.) When I see 500,000 shares in the first half of the day, I'm going to
estimate that the volume at the end of the say will be 1,000,000. Let's write that as a formula.
[TV]*23400/seconds_after_open
At the close (23,400 seconds after the open) this new filter will have the exact same value as the standard volume filter. Half way through the day, it will double all of the numbers. 1/3 of the way through the day it will tripple all of the numbers. Unlike my example with the "if" statements, it will continuously and smoothly update its estimate.
Once you enter this filter, you can use it just like the standard volume today filter. That's worth repeating. Once you have added this filter to your account, you can use it just like the standard volume filter. To continue with this example, you'd look for the new icon in the config window, and you'd type 1,000,000 in the min column. You don't have to know how to write these custom formulas to use them. You can copy a custom formula from a friend, from our support forum, etc. Once you have it, it is very easy to use.
So now we have an estimate of the volume at the end of the day. And it's probably a decent estimate. There are other ways we could have done this, and we can never really predict this value with absolute certainty. But this probably does what you want.
What if I want to do the same thing with price? What if a stock moved up $1 from the open, and it's only lunch time? Could I write a formula which would assume that the stock would be up $2 at the close? Of course we could. (That formula is left to the reader as an exercise. :-) ) But is that correct? If a stock went up $1 in half a day, do we really think it's going up $2 in a whole day?
There are a lot of answers to that question. Predicting the stock market is not an exact science, to say the least. :-) According to the efficient market hypothesis, if the stock is up $1 right now, the best estimate is that the stock will still be up $1 at the close. That's not a very satisfying answer. Can we do better?
Of course we can do better. The secret is to stop trying to predict the market. Let's go back to basics. Trade-Ideas is good and finding stocks that are interesting, important, or unusual. So let's rephrase the question. If a stock is up $1 half way through the day, how unusual is it? If that same stock is up $2 at the end of the day, is that just as unusual? Is it equally important?
That's where Black–Scholes comes in. The Black–Scholes model tells us exactly how to compare different movements of price and time
http://en.wikipedia.org/wiki/Black%E2%80%93Scholes. And the formula is easy to add into Trade-Ideas using our custom formula editor. Here's how it looks:
[FOD]*
sqrt(23400/seconds_after_open)
Wasn't that simple?
For those of you who aren't familiar with Black–Scholes, we're saying that a move of $1 in the first
quarter of the day is just as unusual/interesting/important as a move of $2 over the entire day. A move of $1 in the first half of the day compares to a move of $1.41 at the end of the day.
Want to check that out on your own? As you review the literature on Black–Scholes, look for the term "z-score" (or the related term "standard deviation"). We are saying that these two measurements from different times have different "z-scores". That's how a statistician says that they are equally unusual.
So, if you like to watch our up from the open
filter, but you want to use different minimum and maximum values as different times of day, now you have an alternative. Use this custom filter. Fill the the same maximum and minimum values that you would have used with the standard up from the open filter at the end of the day.
