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Trade Ideas Custom Formula Examples 

One of the most popular ways to use Trade Ideas‘ custom formula feature is to create your technical analysis indicators, we’ll show you some Trade Idea custom formula examples. Whether a novice or an experienced trader, creating and using your own technical indicators can give you an edge in the markets.

Many traders rely on a combination of simple moving averages (SMA) and exponential moving averages (EMA) to identify potential buy and sell opportunities. With Trade Ideas’ custom formula feature, you can create an indicator that incorporates both SMA and EMA data, offering more precise entry and exit signals than using just one type of moving average.

Another popular approach is building momentum-based indicators to track the strength of a security’s trend. These indicators help traders spot strong trends early, allowing them to capitalize on market movements while they last. For instance, you can create a formula that calculates the percentage change in closing price over a specific period, helping you quickly identify sudden shifts in momentum.

You can fine-tune your trading strategy to better match your goals and market conditions. Let’s dive into some powerful Trade Ideas custom formulas that can help improve your trading performance.

Momentum-Based Strategies

1. Breakout Scanner (Simple Moving Average – SMA)
   • Formula: Close > SMA(50) AND SMA(50) > SMA(200)
   • Explanation: This looks for stocks trading above their 50-day moving average, which itself is above the 200-day moving average. This setup indicates a strong uptrend, meaning the stock is showing sustained momentum. Traders often buy such breakouts in anticipation of further upside.
2. Relative Strength Index (RSI) Overbought/Oversold
   • Formula: RSI(14) > 70 (Overbought), RSI(14) < 30 (Oversold)
   • Explanation: The RSI measures the strength of a stock’s recent price movements. A reading above 70 suggests the stock is overbought (potentially due for a pullback), while below 30 suggests it’s oversold (potentially due for a rebound).
3. MACD Crossover Signal
   • Formula: MACD Line > Signal Line AND MACD Histogram > 0
   • Explanation: The MACD (Moving Average Convergence Divergence) helps identify trend direction. When the MACD line crosses above the signal line with a positive histogram, it suggests bullish momentum. Many traders enter long positions at this crossover.

Mean Reversion Strategies

4. Bollinger Band Reversal
   • Formula: Close < Lower Bollinger Band(20,2) (Potential Buy), Close > Upper Bollinger Band(20,2) (Potential Sell)
   • Explanation: Bollinger Bands measure volatility. When a stock’s price moves below the lower band, it might be oversold and due for a rebound. If it moves above the upper band, it may be overbought and due for a correction.
5. 200-Day Moving Average Bounce
   • Formula: Close <= SMA(200) * 1.02 AND Close >= SMA(200) * 0.98
   • Explanation: The 200-day moving average is a key level for long-term investors. Stocks often find support near it. This scan looks for stocks trading within 2% of their 200-day SMA, which could present a buying opportunity.

Trend Following Strategies

6. Golden Cross
   • Formula: SMA(50) crosses above SMA(200)
   • Explanation: A Golden Cross happens when the short-term moving average (50-day) crosses above the long-term moving average (200-day), signaling the potential start of a major uptrend.
7. Death Cross
   • Formula: SMA(50) crosses below SMA(200)
   • Explanation: The opposite of a Golden Cross, this signals a potential long-term downtrend and is a bearish indicator.
8. ADX Trend Strength
   • Formula: ADX(14) > 25 AND DI+ > DI- (Strong Uptrend), ADX(14) > 25 AND DI- > DI+ (Strong Downtrend)
   • Explanation: The ADX (Average Directional Index) measures trend strength. If ADX is above 25, it suggests a strong trend. The DI+ and DI- components tell us whether it’s an uptrend or downtrend.

Volume-Based Strategies

9. Unusual Volume Spike
   • Formula: Volume > SMA(Volume, 50) * 2
   • Explanation: A sudden increase in volume can indicate new buying or selling interest, often preceding big moves. This scan looks for stocks trading with at least twice their average 50-day volume.
10. Low Float & High Volume Play

• Formula: Shares Float < 50M AND Volume > 5x Average Volume (10 Days)
• Explanation: Low float stocks (less than 50 million shares available for trading) can experience extreme price moves when volume surges. This scan identifies potential short squeezes or momentum trades.

Gap Trading Strategies

11. Gap Up with High Volume

• Formula: Open > Previous High AND Volume > 2x Average Volume (10 Days)
• Explanation: When a stock gaps up and has strong volume, it suggests strong buying pressure. This is often triggered by earnings, news, or institutional buying.

12. Gap Fill Play

• Formula: Close < Open AND Open > Previous Close
• Explanation: Stocks that gap up often retrace (fill the gap). This scan identifies stocks that opened higher than the previous close but are now closing lower, presenting a short-term shorting opportunity.

Divergence Strategies

13. Bullish RSI Divergence

• Formula: Price makes lower low AND RSI(14) makes higher low
• Explanation: When a stock’s price makes new lows but the RSI does not, it suggests weakening downward momentum and potential reversal to the upside.

14. Bearish RSI Divergence

• Formula: Price makes higher high AND RSI(14) makes lower high
• Explanation: If the stock price is making new highs, but RSI is not, it signals weakening momentum and a possible downturn.

Earnings & News Plays

15. Post-Earnings Momentum

• Formula: EPS Surprise > 10% AND Close > Open
• Explanation: Stocks that report earnings significantly above expectations and close higher often continue their trend due to positive investor sentiment.

16. News Catalyst with High Volume

Explanation: Stocks reacting to news (like FDA approvals, buyouts or partnerships) often see explosive moves. This scan filters for big price moves on high volume.

Formula: Volume > 3x Average Volume (20 Days) AND Price Change > 5%

The potential for creating custom formulas in Trade Ideas is virtually limitless. By leveraging this powerful feature, you can design technical indicators that align perfectly with your trading style and objectives. Whether you’re a novice or a seasoned trader, experimenting with different formulas can refine your strategies and enhance your overall market performance.

To gain an edge, start utilizing Trade Ideas’ custom formula feature to develop more precise and insightful technical analysis tools. However, always remember the importance of backtesting your strategies on historical data before implementing them in live trading. This ensures that your custom indicators provide reliable signals rather than random fluctuations. By taking a data-driven approach, you’ll be better equipped to seize opportunities and minimize costly missteps.

Disclaimer: This article does not constitute financial advice, nor should it be considered as such. Please consult a qualified financial advisor before making any investment decisions.