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About & Trading Guide

About Trend Terminal

This terminal is an investment aid tool that scans common stocks across the US market in real-time to determine if they meet the Trend Template conditions, and provides weighted Relative Strength (RS) ratings. Respecting copyrights and trademarks, we implement momentum investing strategies from market wizards into mathematical and technical formulas.

Stage 2 Uptrend Overview

Market wizards of growth stock investing divided a stock's life cycle into four stages (Stage 1: Consolidation/Base, Stage 2: Uptrend, Stage 3: Distribution/Top, Stage 4: Downtrend), emphasizing that **one should only trade stocks in a Stage 2 Uptrend**. Stage 2 is the period where the stock price rises fastest and strongest due to massive institutional buying. This terminal uses mechanical algorithms to filter thousands of US stocks in real-time to find those in a confirmed Stage 2 Uptrend.

Trend Template 9 Key Conditions & Formulas

The Trend Template is a set of 9 strict technical conditions to verify if a stock is in a confirmed Stage 2 Uptrend. Our algorithm checks if a stock satisfies all of the following conditions based on daily closing prices:

Trend Template Criteria

  1. Price & Moving Averages (Price > SMA150 & SMA200): Current stock price must be above both the 150-day and 200-day simple moving averages (SMA). This ensures the stock is on a medium-to-long term uptrend.
  2. Moving Average Alignment 1 (SMA150 > SMA200): The 150-day SMA must be above the 200-day SMA, indicating medium-term trend is stronger than long-term trend.
  3. 200-Day SMA Trending Up (SMA200 Trending Up): The 200-day SMA itself must be trending up for at least 1 month (20 trading days). The algorithm compares current 200-day SMA with its value 20 days ago to verify the upward slope.
  4. Moving Average Alignment 2 (SMA50 > SMA150 & SMA200): The 50-day SMA must be above both the 150-day and 200-day SMAs, showing short-term momentum dominates long-term trends.
  5. Short-term Price Position (Price > SMA50): Current price must be above the 50-day SMA, ensuring it is either breaking out or maintaining its immediate momentum.
  6. Percentage Above 52-Week Low (Price ≥ 52W Low * 1.30): Current price must be at least 30% above its 52-week low. This proves the stock has escaped its bottom and initiated a strong trend reversal. (Many true market leaders are 100% to 300%+ above their lows.)
  7. Percentage From 52-Week High (Price ≥ 52W High * 0.75): Current price must be within 25% of its 52-week high (less than 25% correction from the top). This implies strong buying force near high price ranges rather than overhead supply resistance at the bottom.
  8. Relative Strength Rating (Relative Strength Rating ≥ 70): The weighted RS Score (explained below) must rank in the top 30% of the entire stock market (RS Rating ≥ 70). For typical setups, focusing on RS Rating ≥ 80 or 90 is recommended.
  9. Liquidity & Minimum Volume (50-Day Avg Volume ≥ 500,000): The average daily trading volume over the last 50 days must be at least 500,000 shares. This limits our scope to highly liquid common stocks to prevent slippage and allow institutional entry.

Weighted RS Score Calculation

Our core edge lies in the proprietary Weighted Momentum Relative Strength (RS) Score Formula. While typical screeners use simple 1-year returns, trend followers place much higher value on recent price changes. Our formula is computed as:

Weighted RS Score = (1M Return * 0.40) + (3M Return * 0.30) + (6M Return * 0.20) + (12M Return * 0.10)

This formula rewards hot market leaders that have surged over the past 1 to 3 months. We then rank the scores across the entire US common stock universe to compute the percentile rank, yielding the RS Rating (1 to 99). A stock with an RS Rating of 99 belongs to the top 1% of the market in terms of momentum.

Volatility Contraction Pattern (VCP) & Pivot Point

Once you identify stocks in a Stage 2 Uptrend using the Trend Template, the actual buy entry should be timed using the Volatility Contraction Pattern (VCP). VCP occurs when a stock consolidates and the price swings (volatility) contract over time. For example, the first contraction corrects 20% (1T), the second corrections pulls back 10% (2T), and the third pulls back only 5% (3T). Volume must also dry up near the end of the consolidation. The final tight range where volume is extremely low is called the Pivot Point or LMP (Line of Least Resistance). A strong breakout above this pivot represents the optimal buy point.