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Michael Carr's Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing; recommends calculating Relative Strength using Alpha. Using Excel and weekly closing data of Percentage Change of Stock and Percentage Change of Index, he plots a scattergraph of results. Using linear regression a best fit line is drawn and displayed as a slope y=mx+b. The y-intercept (b) is Alpha. He then divides this by the 26 period standard deviation to express a volatility based RS.
He sorts his buy list in this manner ranking the highest Alpha's as percentiles. He buys the top couple percent and sells when they drop below a certain percentile.
I'm trying to put together an Exploration to do this. Has anyone attempted this? Anyone at all??
The canned Alpha in Metastock doesn't seem to deliver this--has anyone coded it?
thanks
Glen
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The Alpha formula in MetaStock is a standard investment calculation. It is described here:
http://en.wikipedia.org/wiki/Alpha_(finance)
Michael Carr's usage is more of the math and science notation where alpha is commonly a reference to quantities such as angles.
At this time, I'm not aware of a MetaStock formula for Mr. Carr's "Relative Strength using Alpha"
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Although I believe there is an outside chance this functionality might be able to be coded in MSFL; like always, if I have to think for more than just a moment about how to workaround the limitations of the MSFL then I just write an external function.
From a programmers' perspective, the project needs some more definition but it is most certainly achievable in C/C++/Pascal/Powerbasic.
wabbit [:D]
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