Zacks Strategy Test















  

    

      

        Strategy Parameters
        

      

        Hover your mouse over each parameter description for help on that parameter.
        

      

        Strategy
                
      

      

        Chart Pattern
        
      

      

        Start Date
        
            
            
      

      

        End Date
        
            
            
      

      

        
        BoP Stop Loss %
        
      

      

        

        
        Trailing Stop Loss %
        
      

      
      

        Buy Rule
        
      

      

        Sell at Open if Unconfirmed
                
      

      

        Minimum Volume
        
      

      

        Buy Limit as % of BoP
        
      

      

        Buy Stop as % of BoP
        
      

     
            

              Max. Hold Days
              
              
            

      

        No. of Positions
        
      

      

        Minimum RS Rank for Buy
        
      

      

        Comparison Index
                
      

      

        Use Market Trend
                
      

      

        Initial Portfolio Value
        $10,000
      

      

        

          
        

        

    

    

    

      

        Buy on Breakout using Zacks #1 Rank 
        

      

        
Overview

          
 Earnings estimate revisions are the most powerful force impacting short term stock prices. The Zacks ranking system identifies stocks with rising earnings estimates. This tool demonstrates how trading breakouts of Zacks #1 ranked stocks can deliver outstanding performance in good and bad markets.

          
Read our white paper describing the strategy in detail.

          
Learn more about the Zacks rank and get a 30-day free trial by clicking their logo:

                      

          
Trading Strategy - Long Positions

          
Our trading strategy is purely mechanical and extremely simple. As a result it is easy to implement for the private investor. The strategy's strengths are:

          
    
            
  •  only two buy rules and three sell rules.          
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  •   parameter values are robust and  constant over all time frames and market conditions
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  • the choice of number of simultaneous positions open is at your discretion
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  • the strategy uses risk control levels that you determine depending on your risk tolerance
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  • the money management rule is powerful but extremely simple
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Buy Rules:

          
  1. For subscribers able to act on email alerts: buy as soon as you receive the alert
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  2. For others: buy at next session's open. (Note: After an alert, these stocks move up quickly and buying at the open can mean paying a significant premium over the alert price with a consequent loss of profits. The premium paid is shown in the simulation results).
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Sell Rules

          
    
            
  1. Sell at next open if it is no longer ranked #1 on Zacks rank.
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  2. Sell at following day's open if it closes below a stop loss level of your choice at any time after breakout and before losing the Zacks #1 ranking.
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  3. Optional: sell at next open if breakout alert not confirmed.
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Parameter Values

          
    
            
  1. Stop Loss level as a % of breakout price. For example 7% would limit loss to 7% of initial position value.
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  2. Buy Limit as % of breakout price to minimize premium paid over breakout price
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  3. Buy Stop as % of breakout price to allow buying if open is below breakout price.
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  4. Number of positions - maximum number of positions to hold at any one time.
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  5. Minimum volume of your choice.
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  6. Minimum RS Rank of your choice.
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Money Management

          
    
            
  1. On buy, invest 1/n th value of available cash where n is the number of open positions. For example, if your maximum positions is 5 and you hold three stocks in your portfolio, on the next breakout you would invest 1/2 of your available cash as you have two positions open.
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  2. On sell, add proceeds to your available cash. This allows compounding of your gains as your position size will grow as your portfolio grows. On a loss, your next investment will be smaller thereby conserving your capital.
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This simulation allows you to test various parameter values. You can see the trades that would be made and the daily portfolio value by clicking the 'View Transaction Data' button which you can then copy and paste into a spreadsheet. We suggest using the default values first.

          
Note: only stocks with a minimum price of $6, minimum avg. volume of 30,000 and RS Rank >= 80 are considered. 

          
The simulation considers stocks ranked #1 as of Monday morning and looks for breakouts in the subsequent 5 days. While a #1 ranked stock will be bought on  breakout, a stock losing its its #1 rank is not sold until the  Monday following the week in which it lost its rank. This potentially reduces the simulated gain or increases the simulated loss. The simulation uses realistic buy and sell prices, but does not account for slippage, commissions, taxes, etc.