IWR "Cheat Sheet"
A glossary of terms we use to help with your Invest with Rules journey! We'll update this periodically.
- ATR - Average True Range is the measure of how much a ticker's price moves in a given day as averaged over a period of time (14 days is a generally accepted look-back period). For example, if SPY has average a 1.5% daily move (from high to low) over the last 14 days, then the ATR would be 1.5%.
- Momentum - is a measure of how much something has moved and in what direction (positive or negative). It is based on the adage that an abject in motion tends to stay in motion.
- Moving Average - is a commonly accepted measure of prices for a ticker to indicate how the price trend is moving. Moving averages (MA) can be "simple" or "exponential", where exponential MAs will react quicker to more recent price changes.
- RS - Relative Strength is typically a measure of how a ticker is performing relative to other tickers or an index.
- RSI - Relative Strength Index (unlike RS) is a measure of how a ticker is moving within it's own range over a lookback period. WE use a RSI of 68 as an overbought indicator.
- Signal - is the outcome of a process or algorithm to trigger potential action. In the case of the stock market, this might be a "buy" or "sell" action, for example.
- Stop Loss - is a price level or % where you will sell a ticker to mitigate risk. This can be done via a hard market order (where you enter the trade in ahead of time), or a rule where you sell of the ticker closes below your Stop Loss.
- Timeframes - your investing time horizon is important to establish. Are you a day-trader? Are you investing trying to hold a ticker for years? At IWR, we use 2 major timeframes: Short-Term, which we define as about a month, and Long-Term, which we define as about a year.
- Trailing Stop Loss - is a form of Stop Loss where you raise the Stop Loss as price moves up in order to increase your level of expected profit.
- Trend - is a way to measure the movement of anything you are watching & measuring. There are many ways to assess a trend.
- Trend Roadmap - is our proprietary tool to assess the Short-Term and Long-Terms trends of any ticker.
- Volatility - how much a ticker moves in a certain period of time. This can be measured many ways (ATR, standard deviation, etc. - we use ATR).
- VoMo - Volatility Adjusted Momentum is a measure of how a ticker has performed over a certain period of time adjusted for volatility. We use ATR % for the Volatility measure.