EdgeWare FastBreak Standard Version 6.5 - Manual (Page 101)

101
RAT (Return Advance to Trend)
Typical FastBreak trading systems usually buy maximum price strength/momentum.
Trading systems can take a different approach and successfully take advantage of buying
temporary price weakness or selling into short term price strength. RAT is an option to
take advantage of these temporary moves. As an example, in the following chart the
stock has made a move above the price trend. The assumption is that the move is tempo-
rary and the price will revert to the trend.
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9
10
11
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12/23/2009 1/2/2010 1/12/2010 1/22/2010 2/1/2010 2/11/2010
Date
P
ri
c
e
Temporary
move above
trend
Trend
Decision
point
The decision point can either be a Buy or a Sell decision point. In this case the temporary
move is a negative because the expectation is that the price will return to the previous
trend. RAT uses an algorithm to penalize this stock’s ranking by the degree the price is
above the trend.
If on the other hand the price moves below the trend then the expectation is that the price
will return to the original trend. See chart below.
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9
10
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12/23/2009 1/2/2010 1/12/2010 1/22/2010 2/1/2010 2/11/2010
Date
P
ri
c
e
Temporary
move below
trend
Trend
Decision point