Ranking Strategies
Updated
03/11/14
Ranking is an important investment tool. This discussion is about WHY
to rank. Click here to learn HOW to rank
Ranking Strategies
Most ranking strategies rank return. However, FastTrack can rank by
volatility (Standard
Deviation), FTAlpha, Ulcer
Performance Index (UPI), correlation, yield, and a variety of other fields. For the most part, ranking
strategies by values other than return are pretty simple and are not discussed further in
this section.
Ranking by return has many nuances
There are several general categories of return ranking.
- Rank return for fixed periods of time . . . 5 years, 6 months, 30 days.
This strategy works for short periods. For longer periods you are welcome to test it if you wish . . . or
save your effort and go to the library to get Money Magazine's year end issue
from last year and see how
well the top ranked issues did this year. Also, see our discussion of Morningstar
rankings. There is a modeling
discussion using Morningstar Indices.
- Rank return based on market patterns.
When the market makes an abrupt turn, issues that move more than the broad market will
likely continue to beat the market for the duration of the move. Ranking periods from a
few months to single day when a sharp turn breaks a downtrend can produce a list of
subsequent winners if the market continues upward from that point.
- Rank return during a correction to find "value" issues.
When the market sharply declines, but the decline is not as broad as a bear market, then
ranking common stocks and sector funds during the decline can produce a list of issues
that investors like so much that they refuse to sell.
Ranking V-Shaped Periods
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One of the most powerful FastTrack selection tools is ranking, BUT you
can't just rank arbitrary periods like months or quarters.
V-Shape Defined
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Funds which lose the least in a market downturn and gain the most in a market upturn
are likely to continue to do well. Rank for a V-shaped period in broad market indicies
like the S&P 500 during which the return is 0.0 or very slightly positive.
This ranking strategy is the most powerful of all strategies.
PART I - Doing a Ranking
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NOTE: If you need any help please call tech support. (866)-295-0166 ext2.
1) Load the Fidelity family using the M command on the chart and type FIDELITY<click OK>.
2) Move the dotted pole to the beggining of the V and hit the down arrow key to plant a Solid Pole
3) Move your dotted pole to the end of the V
4) Rank using the Rank key on the chart toolbar. If the chart toolbar is not present, right click in the middle
of the chart and select toolbar
What you will see when the ranking completes is that the fund that did the
best for the period is displayed. You can sort the return column by clicking the header column.
You can prove this theory using the subsequent return column on the spreadsheet.Subsequent
Return Defined.
This will alow you to see how well the funds did after the V period. The subsequent return column measures
the return from the dotted pole to the end of chart. To test this strategy ,sort by the subsequent return
column by clicking the header column. Then renumber the number column by right clicking and selecting the
renumber option. Now if you sort the return column you can look at the number column to prove that this
strategy works.You will see in the number column that funds that have a low number are doing the best and
funds with a higher number are doing the worst.
Where are the Winners?
----------------------
The funds that did the best for the period are the most likely to continue up
immediately . . . HOWEVER, do not ignore the funds that did the worst since
they are likely recovery candidates from extreme oversold conditions.
The funds to avoid are the funds in the middle. These are least likely to
make major moves in the near future.
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