Longtime TradeStops members are familiar with the impressive array of tools that are on the site and how to use most of them. Over the last year, we’ve added thousands of new members who might not be as familiar with the TradeStops tools.
Every so often, we like to answer questions that members have about TradeStops. When we get a couple of similar questions, we know that there must be a lot of members who want to know the answers.
Below, we’ve highlighted a few recently popular questions along with answers that we hope will help you better understand the TradeStops platform.
Q: What information does the Portfolio Equity Performance graph display?
A: The Portfolio Equity Performance graph is the first thing that pops up on the TradeStops home page, also known as the dashboard. Here’s what it looks like.
The Portfolio Equity Performance chart looks at your portfolio going back one year and measures the gain or loss achieved and dividends received for each position. It also calculates the results of your closed positions. It does not include your cash balances.
It’s important to understand that this measurement only goes back one year. For instance, let’s say you’ve owned a particular stock for a long time and have a 100% gain in the stock. But in the past year, this particular stock is actually down by 10%. The Portfolio Equity Performance chart will only show the 10% loss that has occurred in the past 12 months.
The Portfolio Equity Performance chart includes only the stocks and ETFs that we follow in TradeStops. It does not include your other investments such as bonds, unit investment trusts, or private securities.
In the upper right hand corner, you can change the timeframe to view your performance. You currently have the ability to view your performance over a 3-month, 6-month, or 1-year timeframe. You can also compare your performance with that of several well-known indexes. In a glance, you can see if you’re beating the market or not.
Q: Why does the SSI Stop Loss move higher when a stock is moving lower? I’ve seen this happen a few times.
A: This is a great question. Here’s a good example of this happening. The ETF for the junior gold miners, GDXJ, made a high in August 2016 of more than $48 per share before moving lower over the next two years and finally hitting its Stock State Indicator (SSI) Stop Loss in August 2018.
The SSI Stop Loss when the stock was at the $48 level was $27.41, yet GDXJ stopped out two years later at $31.15. You can see that the red line that represents the SSI Stop Loss was moving higher on a stock that was moving down. Why?
Take a look at the bottom of the chart. The green line represents the historical Volatility Quotient (VQ). Remember: The VQ tells you how volatile a stock is — how much room you can give a stock in order to not get stopped out too early. In this case, the VQ for GDXJ dropped over the same period of time from 43.8% to 36.4% when it hit its SSI Stop Loss.
As a stock’s VQ drops, we would expect to see less-volatile moves in price, meaning it has become less risky. As such, the SSI Stop Loss changes to reflect the lessened volatility from the stock’s most recent high. In other words, as the stock’s volatility drops, we raise the SSI Stop Loss so that you aren’t taking more risk than you may have intended.
Keep in mind that we only raise the SSI Stop Losses, we never lower them. When a stock’s volatility increases, we don’t lower the stop; we keep the SSI Stop Loss at the same level.
Q: I’m new to TradeStops. Why does the Risk Rebalancer want me to buy more shares of stocks that are in the SSI Red Zone?
A: That’s a question our Customer Success team receives quite often. Here’s a hypothetical example that shows the Risk Rebalancer output calling for an increase in the number of shares in GE (in the SSI Red Zone for more than two years) to more than double the current position.
The important thing to remember is that the Risk Rebalancer assumes that the stocks you input into the tool are the stocks you want to own.
If you don’t want to keep any stocks in the SSI Red Zone, you can make that choice before you click on the “Rebalance” button.
Click on the “Show advanced options” link to open up a window that allows you to check a box that will exclude the stocks in the SSI Red Zone.
The result is noticeably different — we’re not buying any more GE or any other SSI Red Zone stocks.
We’ll go over these questions and others you might have in our next educational webinar on Wednesday, May 22 at 1 p.m. ET. Click here to register for the presentation. Also, please send any questions related to these or other topics to [email protected] and we’ll review a few of these live during our presentation.
Research and Education Specialist