For many years, VectorVest has been a mainstay of short-term traders and market timers alike. The program has built a loyal following with its unique combination of buy/sell recommendations and proprietary market timing data on an end-of-day basis. Recently, VectorVest took this analysis to a new level with the release of VectorVest RealTime, which offers the market features users have come to rely on, along with search, sort, ranking, system testing, and portfolio management functionality—now updated continuously throughout the trading day.
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In this article
- Download & Go
- Universe & Data
- Ranking & Market Timing
- VectorVest Views
- Final Thoughts
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Download & Go
After signing up for real-time service—there is a 30-day trial available for $29—you download the program from the VectorVest Web site. Installation is very straightforward and within minutes you are up and running. If you are not good at memorizing log-in names and passwords, make sure you keep this information handy, as you are prompted for it every time you open the program.
One thing I did notice immediately was that the program appears to be a bit of a resource hog. On my Dell XPS 420 Windows XP system with 3.25G RAM and an Intel Core Duo processor running at 3.16GHz and connected to a T-1 line, I noticed a severe slowdown once I connected to the real-time data feed. Web browsing slowed to a crawl and opening additional programs magnified the problem. Luckily, you have the option of turning off the data feed, which frees up system resources should you need them.
Once you have VectorVest RealTime up and running, you will find it very easy to navigate. The program window consists of several tabs and opens on the Home tab, which is shown in Figure 1. This is the default layout of the Home tab. However, you can customize it to your liking by choosing from a variety of “gadgets”—mini windows displaying specific data that can be moved within the Home tab or detached from the program window and moved elsewhere, such as to another monitor. Even the gadgets themselves are customizable so you can alter their size, color, and amount of data they display.
Also on the Home tab you will find the Dashboard, which consists of three gadgets of your choosing. Unlike the other gadgets on the Home tab, however, the Dashboard is visible on all of the tabs within VectorVest RealTime. This allows you to specify the data and information you feel is most important so it is readily accessible. To free up more real estate, you can also minimize the Dashboard.
Universe & Data
The VectorVest RealTime database consists of approximately 8,000 U.S-traded stocks, 60 market indexes, 226 industry groups and 41 sectors. The stock universe, for the most part, is comprehensive, although I did run across a few ADRs (American depositary receipts) that were not tracked by the program.
Intraday pricing is available for the last five trading days, while end-of-day data goes back more than 10 years when applicable.
You can export price data, along with a range of fundamental and technical data elements into a spreadsheet. The only data you cannot export are VectorVest proprietary components.
Ranking & Market Timing
VectorVest utilizes a bottom-up analysis approach to arrive at a value for each of the stocks in the database. From there, the program measures the stock’s value, safety, and timing. Relative value (RV) measures a stock’s long-term price appreciation potential; relative safety (RS) measures the predictability of a company’s financial performance; and relative time (RT) projects the short-term price performance of a stock. A weighted vector sum of these three variables is used to arrive at the VST (value, safety, timing) measure. Stocks with the highest VST have the best combination of value, safety, and timing. Based on its VST and price movement over the last 13 weeks, a stock is then assigned a buy, hold, or sell recommendation.
Beyond providing you with an indication of the strongest stocks, sectors, and industries, VectorVest RealTime provides data regarding the overall direction of the market to ensure you are investing with the trend and not against it. Figure 2 illustrates several of these market timing indicators as of mid-day on August 28, 2009.
The market timing indicatoris based on several values, including the relative timing (RT) vector mentioned earlier, as well as the VectorVest Composite and buy/sell ratio . The VVC is a price-weighted average of the prices of all stocks in the database. This offers a more comprehensive view of the market than the Dow Jones industrial average or the S&P 500. Furthermore, unlike most market indexes that are market-cap-weighted, the VVC is less easily influenced by large stocks. The buy/sell ratio is a measure of all buy recommendations compared to sell recommendations on the stocks in the database. The MTI identifies the underlying market trend as well as the trend’s strength and momentum. Traders find it useful for identifying market turning points.
The Market Timing Gauge provides a current reading of the market trend while the Color Guard provides an indication of the direction and strength of the overall market by tracking the changes in the VVC, RT, BSR and a recent history of the changes in these timing indicators. In actuality, the Color Guard portrays three trends. This first is the short-term trend or primary wave, which is based on the price movement of the VVC. The intermediate trend is determined by the value of the MTI. The Trend column on the Color Guard indicates the primary and intermediate trends using either up or dn. Lastly, the confirmed trend is a long-term indicator based on two consecutive week-over-week up or down moves by the VVC and confirmed by the value of the BSR.
If you are looking for trading ideas, the Stock Viewer is the easiest way to see those stocks with the highest VST ratings. Remember, however, that it is a good idea to consider the overall market trend before placing trades.
The Stock Viewer display provides over 100 pieces of sortable data, most of which update in real time throughout the trading day. The data is primarily fundamental in nature. You can create your own data fields, which you can use for sorting or searching, but they are tied to the data fields available in the program.
A nice feature of the sort function is the ability to specify primary and secondary sorting criteria. Also, by right-clicking on any stock on the Viewer tab you can access VectorVest analysis reports, historical price data, and a price graph.
From the Viewer tab you can sort industries and sectors to identify the strongest sectors, the strongest industries within those sectors, and finally the strongest stocks within those industries. Clicking on a sector provides a list of the industries within that sector. From there, you can select individual industries to see the underlying stocks. In addition, there are Viewers for market indexes and exchange-traded funds.
VectorVest RealTime contains several predefined WatchLists, which you access from the Viewers tab. These watchlists cover indexes, ETFs, industries, and sectors. You can also create your own watchlists manually or using the results of a search.
On the Unisearch tab, there are over 300 predefined market searches. You can find searches to match specific market conditions or your trading behavior (conservative to aggressive). Searches are designated as long or short by up or down arrows, respectively, in front of their name. Clicking on an individual search will give you a brief overview of the search as well as the criteria used. Figure 3 displays the VST Mighty Mites search criteria and intraday results as of August 28, 2009. This search is designed to find low-priced stocks with high growth-to-price-earnings ratios and high VST values.
If I had wanted to, I could have run this search on any exact time over the last five trading days or based on end-of-day data going back to June 1995. There are also searches for ETFs (and inverse ETFs) as well as sectors or industries. Users can modify predefined searches and create new ones.
Before putting real money into any type of strategy, it is useful to have an idea of how it has performed in the past. VectorVest RealTime claims to offer backtesting capabilities. However, this is a bit misleading. The program allows you to run QuickTests on all or some of the stocks passing a search to see the number of winning or losing stocks, the percentage gain or loss for the stock and the annualized performance. You can even specify the start and end date of the tests using end-of-day data, or specify the time to test intraday over the last five trading days. However, you cannot create a custom trading strategy with specific entry and exit points and test its performance.
You have two options for creating portfolios in VectorVest RealTime. The first is QuickFolios, which are instant portfolios of stocks from a Viewer or Unisearch. You can manually select the stocks from a listing or select the top stocks based on whatever ranking you are using.
The Portfolios tab offers more robust portfolio capabilities. As with a QuickFolio, you can create a portfolio manually or by selecting the results of a search. Creating portfolios from searches allows you to track their performance going forward. You can set up portfolio “automation,” where you receive alerts and/or close positions once a certain stop-loss criterion has been met. You can even instruct the program to replace closed positions with stocks using any of the available searches. However, if you wish to follow your portfolio strategy, you will need to manually place your trades with a broker.
Figure 4 illustrates the performance of a portfolio I created using the Marathon Unisearch with data as of the close on October 11, 2007. I had expected the program to test the stop-loss and replacement parameters I set for the portfolio automation from October 11, 2007, through the close on August 27, 2009. However, the program merely looked at the data as of August 27, 2009. No true backtesting took place; changes will only take place going forward. I had expected that the program would have tested the portfolio for every day between October 11, 2007, and August 27, 2009. I suspect that most other people experienced with system trading software would feel the same letdown.
VectorVest RealTime produces several portfolio reports—a transaction log, current holdings, summary report, and a tax report.
For charting, VectorVest offers easy-to-read candlestick charts. Those who are unfamiliar with candlesticks may find these a bit confusing. The charts use open-high-low-close data: Green candles indicate that the current closing price is higher than the previous closing price, whereas red indicates a closing price below the previous close. However, the candles can also be filled in or left hollow to illustrate the relationship between the open and closing price—a hollow candle means the closing price is higher than the open and a filled-in candle indicates the closing price is lower than the open. Therefore, a green filled-in candle represents a period where the current closing price is above the previous close, but is lower than the opening price.
You can create charts with up to five days of intraday data or with over 10 years of end-of-day data. You can add any of the 100+ data variables in the program to a chart and draw custom trendlines.
If you are expecting to perform in-depth technical analysis with VectorVest, you will be disappointed. The program offers very few technical indicators. For more advanced technical analysis and charting and searching, you will need to purchase the ProTrader add-on for an additional one-time fee of $495.
The Views section of the program is a daily newsletter and serves as an excellent place to gain an understanding of where the market is headed and how you may be able to capitalize on those movements. Monday through Friday, there is a brief synopsis of the changes in each of VectorVest’s market timing indicators and a summary of what they mean for the overall market trend. Lastly, there is the strategy section which discusses trading strategies for prudent or aggressive investors as well as what steps are being taken in VectorVest’s Yellow Brick Road model portfolio.
Each Friday there is also an essay from Dr. Bart DiLiddo, founder of VectorVest. He shares his insights into what is taking place in the market as well as tips and strategies for using the program.
On a weekly basis, the Views area also highlights a “strategy of the week,” which is one of the pre-built Unisearches in the program. This is a good way to learn more about the strategies in the program.
VectorVest provides a wealth of resources to help new users get the most from the program. There are video tutorials providing an overview of the key components of the program and an in-depth Help System. You also receive periodic E-mails with tips on using the program and can access free on-line training classes. Luckily, the program is very easy to use.
VectorVest has successfully navigated the marketplace by offering buy and sell recommendations and unique market timing analytics. Historically, users had to wait until the end of the trading day to update their analysis. With this new real-time offering, users can monitor the market minute-by-minute, run searches for a variety of market conditions and trading styles, and track them throughout the trading day.
That being said, VectorVest RealTime is targeted toward a select group of investors, specifically short-term traders. Furthermore, it is not designed for traders looking to test their own strategies or for those looking for high-level technical analysis. Also, at $129 a month or $1,395 a year (for non-professionals), the program is priced only for serious traders. However, if you are an active trader looking for a more directed approach, VectorVest RealTime stands as a unique idea engine.