RGB and Roll Scores

business_wizard007002.jpg business_wizard007001.jpg

 

 

In order for a security to be "RGB", it must have a Roll Score of 80% or more on a 5 year look back.  The Roll Score is calculated as follows:

 

VistaTrades will start exactly 1260 trading days prior to the test day, which can be today, or a date in the past.  If historical data does not exist for 1260 trading days prior, VistaTrades will go back as far as it can, but never before 7/13/2012.  Five years is about 1260 trading days.

 

Starting on that 5 year old date, VistaTrades will look for the very first Green Day with strength or the very first Blue Day where the security reversed in its own Buy Zone. When that happens, VistaTrades will consider the open price on the very next trading day as the Buy Price. Next, VistaTrades looks for the first following Red Day with weakness. On that day, VistaTrades will consider the closing price as the Sell Price. If the Sell Price is greater than or equal to the Buy Price, that is considered a success. If not, it is considered a fail. Commissions for buying and selling are NOT considered here.

 

Then, VistaTrades looks for the next Buy followed by its Sell. This procedure continues until either today has been reached, or a particular date in the past is reached if you are back testing the system. The total successes and fails are factored into the total buys that occurred. If the result is 80% or more, the security will be classified as RGB, otherwise it is nonRGB.

 

RGB means RedGreenBlue and these securities tend to follow market trends of the 3 monitored indexes: The S&P 500, the NASDAQ Composite and the Russell 1000. So why not just buy and hold index funds? Because historical back testing proves that VistaTrades will SOMETIMES outperform that strategy.

 

In addition to the 5 year look back, VistaTrades also does look backs for 3 months, 6 months and 9 months zones prior to the test date. The historical performance of buying and selling in these zones is calculated and presented to you. Broker commissions at the buy and sell are factored into these values.

 

In these zones, when VistaTrades is looking at a Buy Signal to open a new position (go from not owning shares to owning shares), that Buy Signal will be tested for the 5 year RGB look back. VistaTrades will not open a new position unless the security is RGB on that day. This is why drawing the charts takes so long...almost every date in the chart is being tested for look backs.

 

Once VistaTrades owns an RGB Security, if at any point it becomes nonRGB, buys will occur if necessary when roll scores are less than 80%. See "Bootstrapping".