Tradingmarkets’s Alvarez Factor by Steve Primo

Tradingmarkets’s Alvarez Factor by Steve Primo

What Is The Alvarez Factor?

The Alvarez Factor is based upon a normally occurring short-term pattern that is built into the price action of most freely traded markets. For decades, it has been widely known that extremes in fear and greed almost always produce extreme reversals in the market.

The Problem: Over time, volatility levels change. When this occurs, edges that seem to be working like “money machines” for a period of time suddenly evaporate.

The Alvarez Factor Solution: Here is how The Alvarez Factor has solved this problem once and for all. The creators of The Alvarez Factor, studied over 8.5 million stock openings and searched for properties of emotion-driven reversals which have appeared to be inherent in the marketplace.

After random noise and chaos and fluctuations in volatility (the curse of all daytraders) were removed, we found the most stable and statistically robust intraday reversal pattern that we had seen through all the years of research we have done.

When this pattern occurs in a stock…

There is a high statistical probability of the stock closing at the end of the day at a significantly higher price than the opening price.

How Does The Alvarez Factor Work?

The Alvarez Factor uses four main criteria to identify day trading situations that have historically led to outsized gains. Depending upon the variables you choose (we’ll teach these variables to you on an in-depth basis), the average returns per trade have ranged from 1.42% to above 3.07% since January 2000.

What are these four main criteria? Let’s look at them…

1. Volatility - You cannot make money day trading in stocks that do not move! Using historical volatility calculations help, but you won’t know if the volatility will be there today. And if there’s no volatility, there’s little to no opportunity to make money for the day. We will teach you how to be in the exact stocks which have the highest probability of having large intraday moves. And we will teach you how to focus on the ones which have the historically highest likelihood of moving to the upside for the day.

2. Relative Strength - Does strength lead to further strength? Or does weakness lead to further strength? You will not only be able to answer this once you’re done with the first day of our course, you will see more than a decade’s worth of statistical evidence (never before published). This has been proven with tens of thousands of examples to show you what you need to be looking for every morning in your daily trading set-ups. This information is also scalable and can be adjusted to either find even more set-ups or if you want, fewer set-ups whose historical edge has been even greater. And we provide you with the software to run these scans, again with you having the knowledge of the statistical backing of these key criteria.

3. Today’s Price Movement - Most successful day traders know that the opening is many times the key to the rest of the day’s movement. We will teach you the “exact” opening parameters you should look for and the statistical backing of these parameters. And again, should you wish to adjust these parameters, you will have all the statistics to back you up before you finalize each trading decision. There will be no more subjective trading and no more guessing to your day trading once you are done with this course!

4. Daily Market Direction - As most successful daytraders know, the overall market direction many times dictates the success of their results. By simply adding one simple market timing filter to the above key components, results have been improved to above 3% per trade. We will teach you this add-on enhancement and we will teach you three additional powerful filters which have also improved the daily gains.

Taking these four key variables, you will be in the position each morning to focus only on the stocks that have had the biggest historical edges. Some days (about once per week) no trades will trigger. Other days, many stocks will trigger.

We will not only teach you how to exactly pinpoint these stocks, but we will teach you how to place your buy entries (this is critically important) and how to exit the trade. Even though The Alvarez Factor is structured to be traded systematically from open to close, you will also be taught how to trade it intraday should you decide to. All of this will be taught in Day Two of the course, plus it will be followed up with 10 weeks of ongoing instruction.

How Well Has The Alvarez Factor Performed?

We ran The Alvarez Factor’s key pattern through millions of tests on over 6800 stocks (including all S&P 500 and Nasdaq 100 stocks). And we were impressed by how strongly and consistently this daytrading pattern held up over the course of many years through up markets, down markets and everything in between.

Our research told us that when this edge has been applied in a strict manner in every trade, the method has continually come out ahead.

* 60 of the past 62 months have been profitable in simulated trading when all the signals were taken.
* Plus, there were monthly gains of 10% or more in 36 of those 62 months (again, no leverage was used).

What’s more, the method’s edge is highly flexible and, in the hands of an experienced trader, it can potentially be improved upon dramatically.

The majority of daytraders would be very pleased to trade with 1/2% gains per trade or more. But we will teach you how to add a filter in one variation of the method and bring the simulated results up to 3.07% per trade!

The sum total of the underlying logic of The Alvarez Factor is contained within only five simple, easy-to-learn rules. Take a minute to study the following chart examples of simulated trades that were triggered by these rules…

Who Will Benefit Most From The Alvarez Factor?

The Alvarez Factor is ideally suited for traders with a wide variety of backgrounds and needs. Here is just a sampling of who stands to benefit from The Alvarez Factor…

1. Are you a successful daytrader with three years of experience or more? For you, The Alvarez Factor can be a starting point for constructing a new framework to improve your overall trading performance, consistency, reduce drawdowns and smooth out your equity curve. We’ll teach you a variety of ways in which you can apply discretion by being guided by statistics we will provide you with. This includes a tactic in which you can “tighten” or “loosen” parameters in order to potentially achieve higher percentages of winning trades. Is your goal to continue to be a professional daytrader for many years to come? The Alvarez Factor will potentially keep you there.
2. Do you work in a fulltime job or profession, but wish to day trade part-time? The Alvarez Factor is not for you. It’s designed especially for professional traders who have the ability to exploit fast-moving situations.
3. Are you an experienced system trader? You will be able to potentially increase your edge by fine tuning your entries and exits. We’ve tested numerous combinations and added filters which can increase the percentage of correct trades and improve gains. We’ll provide these tools to you so that you can replicate (and improve upon) these results on your own.
4. Are you currently a professional swing trader? With The Alvarez Factor, you can actually day trade without having to stare at a monitor all day. Both your entry and exit orders can be placed before the open. And have ever owned a stock that was sent lower at the open because of after-hours news? Now you can avoid that overnight risk, because with The Alvarez Factor, all of your positions will be exited at the close.
5. Are you a daytrader who wants to improve his performance? Now you can trade unemotionally simply by following five simple black-and-white rules. These rules will tell you exactly when to enter and exit. It no longer matters what chaos and noise unfold during the course of the day in the newswires. You will be trading a high-performance system with a statistically-backed edge.

Published in 2005. this is 12 weeks mentoring session. no physical CD/DVDs. subcribers can download the mentoring materials from the Tradingmarkets website. The materials included the 7 Streaming videos, Tradestation Code, 7 Amibroker code, 65 pages Pdf manual, 2 MS Excel files. Retail at $7500