Help Portal

Use this portal to locate Data Definitions, FAQs, Tutorials, and more!

Frequently Asked Questions

Q: What’s Market Structure Sentiment™?

A: It’s the core predictive EDGE metric for entries and exits in any stock or sector, and the whole market.  See definitions for more.  In short, it’s a ten-point mathematical scale metering how the market and its components move from over-loved to under-loved – Overbought to Oversold. Thanks to the rules governing stock-trading under Regulation National Market System and the largely mathematical nature of trading now – over 86% of market volume daily on average is something other than rational thought – we can measure waxing and waning behaviors and accurately predict short-term tops and bottoms. We use those as entry/exit signals to beat the benchmark.  It consistently works. See the Five Easy Steps videos under Tutorials.

Q: How do I find entries and exits for my stocks? 

A:  See the question immediately above. Entries and Exits are mathematical places on a ten-point scale where stocks tend to either rise or stop rising.  You want to buy when stocks have a higher probability of rising, and selling before they have a higher probability of falling.  Headlines and financial results cannot reliably be counted on as signals because most of the money in the stock market isn’t tracking those. It’s mathematical. See in Tutorials Five Easy Steps videos #3 and #4. 

Q: How do I screen for good stocks to trade with EDGE?

A: You can use our queries for creating porfolios.  See video Tutorials, and especially Five Easy Steps #2 on creating portfolios.  HOWEVER, it’s vital to understand that you can use whatever you want for idea-generation.  Say you like AAPL. It’s owned by everyone as the most widely held index stock in the world. It’s not a clever new idea!  But you can make money on any stock by buying it when others do, and leaving before others do.  Market Structure Sentiment™, our key metric, will help you. See the Five Easy Steps videos under Tutorials.

Q: How do you define Overbought and Oversold?

A:  Our measure, Market Structure Sentiment™, is quantitative and has nothing to do with the views of analysts or any fundamental factor. It reflects supply of and demand for stocks. On our 10-point scale, levels above 5.0 signal more demand than supply, and vice versa.  All stocks and the whole market are somewhere on that scale at all times. Stocks with more demand than supply do better, and vice versa. When stocks hit 10/10, they’re Overbought, 1/10 Oversold. The whole market trades between 4.0 and 6.0 most times, meaning it’s Overbought above 6.0 and Oversold below 4.0. 

Q: Are Short Volume and Short Interest the same thing?

A: No. Short Interest, the widely followed gauge of stocks borrowed, sold and not yet covered, dates to 1975 when the Federal Reserve established it to track money in margin accounts. The USA had abandoned the gold standard in 1971, and financial-market volatility exploded. More money began using hedges like options and futures, and borrowing. But there were no electronic markets, no index funds, no exchange-traded funds, no high-speeding trading, no instant-messaging, on it goes. It’s not a contemporary or predictive metric. Short VOLUME by contrast is a 2010 measure regulated by Finra, the equity markets watchdog for brokers, metering the amount of trading volume coming from borrowed. It’s an excellent supply/demand metric, and it’s one of two key predictive measures we use.  You should rely on it only for fine-tuning though. Market Structure Sentiment™ is the core predictive metric.

Q: Why isn’t your data realtime?

A: Bluntly, because realtime data is not predictive.  Correlations at the tick-level – at the point where prices are set – reach zero. Of what use is that? You’re chasing prices with no pattern, guidance, or purpose. Investors cannot possibly keep pace with the speed of the market.  We take a LONG step back so we can observe patterns of change over time, reflecting supply/demand fluctuations, which become reliable signals of near-term directional change. Our data is T+1 in most cases, meaning it’s yesterday’s data.  We’re aiming for signals giving us 3-7 days of advance notice about changing stock prices, market-direction.  Realtime data can’t do that.  Don’t trade prices. Trade Sentiment.

Q: I bought a stock that ticked up from Sentiment 1.0 but I’m losing money. Why?

A: Not every stock that ticks up rises. It’s the CENTRAL TENDENCY though – the probable outcome, all other things being equal. However, there are three additional considerations. First, Step #5 of the Five Easy Steps for success with EDGE is Managing Overall Risk.  If broad Market Sentiment is peaked and falling, entries for individual stocks can at times be like the best chair on the deck of the Titanic. The broad market trumps all, because so much money waxes and wanes on an asset-allocation cadence that we can see with broad Market Sentiment.  Second, if Short Volume is high, 1’s may not rise.  Too much supply.  Third, backtest, backtest, backtest. That’s #4 of the Five Easy Steps (see Tutorial videos). If you can’t get good math on returns, it’s not the math that’s wrong, it’s the stock.  Pick something else.  If the Sentiment patterns are weakening, a stock may not rise. The supply/demand equation has fallen apart.

Q: How do I know when to sell?

A: Backtest your data with Profiler. See video #4 of the Five Easy Steps for success with EDGE.  In sum, sell when the data show supply is becoming larger than demand.  That happens with Sentiment, the key predictive tool.  Say a stock has been at 10.0. Then it goes to 9, 8, 7, 6, 5…. If it falls below 5.0, supply exceeds demand.  It’s likely to stop rising or fall.  And sometimes it happens faster.  Say a stock is at 10.0 for days, then Short Volume rises above the stock’s trend, and even over 50%. Supply is rising faster to demand.  Short Volume is nothing more than artificial supply. Take your gains. 

Q: Is EDGE better with some stocks than others?

A: Stocks with prices below about $8 have higher standard deviation in metrics, which reduces reliability. Beyond that limitation (see the FAQs on ETFs and penny stocks next), the rules are the same for all stocks in the US National Market System (NMS). It’s physiology in effect. As humans are beneath the skin the same, so are stocks in the NMS. Now sure, the math will work better on some stocks than others at various times. But that’s what EDGE is supposed to do.  It shows you not only where you should go, but where you shouldn’t.

Q: Why no ETFs on the EDGE platform?

A: ETFs are the greatest modern financial-markets phenomenon. Never has so much money chased one instrument so ravenously – not even 16th century Dutch tulip bulbs!  But ETFs are also derivatives dependent on an arbitrage mechanism – different prices for the same thing – for prices. And because ETF shares are constantly created and redeemed (Investment Company Institute Data show around $500 billion of creations and redemptions every single month), the supply/demand features EDGE applies are less reliable.  Maybe that’ll change in the future. One thing you CAN do:  If Tech is Overbought and Staples are Oversold, you can shift out of Tech ETFs and into Staples. You’re likely to catch a wave and avoid a shoal. It’s just an example. 

Q: Why don’t you include penny stocks?

A: The quantitative software and mathematical models underpinning EDGE are predicated on the rules of Regulation National Market Systems (Reg NMS) governing quotes, trades, data and access to all three.  That rule doesn’t apply to what’s colloquially called “the pink sheets,” the Over-the-Counter market where penny stocks are traded. 

Q: What happens if Reg NMS changes?

A: We update our models, math and analytics to reflect changes.  In fact, in Jan 2020, the SEC proposed a revamp of Reg NMS that traders call Reg NMS II.  It’s even larger (595 pps as proposed, versus 524 pages for Reg NMS Final Rule) and proposes some big changes, especially to how data plans are governed and what constitutes a “round lot.” It’ll take years to matriculate. If it passes, we’ll adjust models.

Q: How often do I need to review my EDGE portfolios for entries and exits?

A: Once a day, maybe not even that often. Generally, though, check your positions relative to your math each day. If you’re buying stocks ticking up from 4.0, buy the first uptick over that level. If you’re selling stocks reverting below 5.0, follow it.  CAUTION: Don’t be afraid to take gains!  EDGE is designed to help you generate a few percentage points of returns every week or two while avoiding losses.  It’s not intended to have you off chasing rainbows.  Disciplined use of data can produce those sorts of returns in any market.  So if you’ve seen an 8% gain and your position has topped Sentiment, rising Short Volume, take your gains. But you don’t have to sit and watch trading screens all day.  That’s yesterday’s approach. EDGE is the new way to trade.

Q: Isn't Market Structure EDGE trying to time the market? 

A: No, it's rebalancing portfolios away from holdings that are Overbought and toward holdings that are Oversold. It's what index funds do except the triggers here for rebalancing are driven by market structure rather than weightings.  Statistically, some portion won't hew to the math, but the great majority will, and disciplined data-application will keep your portfolio weighted toward holdings mathematically likely to outpeform the market.  Algorithms set most prices in the market now. Knowing when algorithms will stop setting higher prices, or when they will resume, is a mathematically measurable condition, and we measure it with Market Structure Sentiment(TM). 

Q: How are Market Structure Analytics different from technical analysis? 

A: Technical analysis turns on price and volume, which are not metrics but consequences of underlying behaviors. We measure underlying behaviors discretely in context of the rules that govern how trades execute today. All prices are not equal and neither is all volume. The behaviors driving volume have different purposes and time-horizons, and by separating them and measuring how they set prices, we can statistically predict when these behaviors will wax and wane, affecting price-performance. 

Q: If everyone in the market began using Market Structure Analytics, wouldn't that undermine data reliability? 

A: Regulation National Market System has been in place since 2007 and forcing conformity on prices and behaviors, and Market Structure Edge(TM) is the first quantitative market-structure application for portfolio-shaping. We have plenty of time. 

Q: Will corporate news or events like earnings alter outcomes, so Overbought stocks will continue to rise rather than fall? 

A: Of course that can happen! But the rules still apply. In most cases, stocks that are 10/10 Overbought and more than 50% short before results will decline regardless of stellar financial results, because these conditions tell us investors have already bought. 

Q: Won't transaction costs and taxes from constant shaping erode results? 

A: Factor for them and do the math of course, but beating the benchmark by shifting resources toward stocks with high probability of outperforming the market due only to market-structure factors is a better strategy than reducing trading costs but underperforming the benchmark. 

Q: How do factors like fundamentals, relative strength, beta and so on apply to Market Structure Analytics? 

A: Market Structure Sentiment(TM) reflects the behaviors, motivations, and time-horizons of all the money in its discrete proportions behind price and volume. But fundamentals don't set prices. Machines do.  It's better to know how machines set prices and factor that into your decision-making than to hope fundamentals will manifest in the way machines set prices. 

Q: Why not just find the best businesses in the market and buy those stocks?  

A: All Active investors are trying to do that, yet 75% of them underperform the broad measures. Billionaire Ron Baron of Baron Capital said in a 2017 CNBC interview that he has owned 2,500 stocks since founding his asset-management firm, and if one removes 15, he would be average. That means 99% of his stocks were average.  Trying to find the 1% that will win, is a far riskier strategy than incorporating market rules that demonstrably produce statistical outperformance a majority of the time. 

Data Definitions

Key Behaviors: 

  • Active Investment: Stock-picking on business fundamentals. Classic bottom-up investing. When you see it's the lead behavior and stocks are rising or falling, it means thinking people are buying or selling. Today it often signals a change in market direction because Actives have such a hard time keeping pace with the market, and are only about 14% of trading volume at best.
  • Passive Investment: Quants, index funds, Exchange Traded Funds. This is the investment engine of the market today but it's nimble and tends to shift much more quickly than long-term money from one sector to another, from value to growth. When it's leaving, get out of the way. When it's arriving, follow it.
  • Fast Trading: Machines profiting on very short-term directional trades. If shorting falls or rises and this is the lead behavior it's signaling a coming turn. It's not right all the time but most of the time.
  • Risk Mgmt: Counterparties to derivatives, borrowing, other forms of leverage and insurance. Quants, active hedge funds, Fast Traders, ETF market makers all use directional leverage (being long or short gamma -- volatility). This trade became pervasive during the long bull market but was devastated in March 2020. Bottom line, when you see it, the motivation driving the prices of these stocks up and down is the OPPOSITE of investment -- it's risk mitigation, or leverage.

Market Structure Sentiment™: A predictive mathematical calculation of the velocity of short-run price-movement driven by behavioral change and normalized to a scale of 1-10 with 1 being negative but oversold and 10 being positive but overbought.

Broad Market Structure Sentiment™: This is the Market Structure Sentiment described above, applied across the entire Market Structure database of Issues and is a five day moving average.  

Key Behavior: Of the four key monetary demographics comprising volume, the one leading to set bid or offer the past five days.

Short Vol%: Daily average percentage of trading volume comprised of borrowed shares (a long bias is preferable).

Closing Price: T+1 price, not realtime or same day.  EDGE isn't meant to give you today's price but a signal five days from now based on Market Structure Sentiment(TM) and Short Volume about the PROBABILITY of prices to rise or fall five days out.  EDGE isn't about buying or selling price, but finding Entries and Exits with Sentiment. 

Tutorials

Introduction to Market Structure EDGE (2 mins)

EDGE Easy Step #1:  Learn the Dashboard (3:26). The first step is knowing what your Dashboard -- Command Central -- is telling you.  

EDGE Easy Step #2: Creating Portfolios (5:08). With a grasp on the data from learning the Dashboard, your next step is learning how to query the data and create portfolios. 

EDGE Easy Step #3: Understanding Entries and Exits (4:39). With your dashboard mastered and portfolios created, the third simple step is visualizing data, realizing you don't trade prices.  You trade Sentiment and Short Volume. 

EDGE Easy Step #4: Backtesting Your Data (5:27). The fourth simple step in the easy five to success with EDGE is backtesting your data.  Always, always test.  Never guess. 

EDGE Easy Step #5: Manage Overall Risk (2:37). The last step on your successful journey toward the new way to trade is protecting yourself from surprises.  

 

GUEST TUTORIAL- Benzinga's Nic Chahine:  Using Market Structure EDGE with Nic Chahine, options editor, Benzinga. (12 mins, Sep 2020):

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What is Market Structure Sentiment(TM)? (4:29)  Market Structure Sentiment(TM) is the key EDGE quantitative metric used for predicting prices.  How does it work? 

What is Short Volume % in My Portfolios? (2:52)  Short volume is our second key metric.  What is it, and how does it help?

What are Key Behaviors? (5:34) Key Behavior is a metric on the EDGE platform. What does it tell us, and what's its origin? 

Recording Your Dynamic Portfolio Criteria. (2:20)  Want to keep track of the criteria in your dynamic portfolios?  Record them in the Notes section and they'll show up under your portfolio title.