Tuesday, June 2, 2020

What is ASTRA's stock market X-PRICE?

ASTRA (Automated Stock Trader Analyzer of The MyPinoy Network) uses a specific price for its analysis and reports. Most traders utilize what is known as the "last" price which is the closing price which the majority deem as the correct and "final offer". However ASTRA does not believe that the last price should be the only determining factor for what the "real" price is. So in this article, we will explain why it believes that to be the case and how it tries to approximate what makes up for a "xensible" price! We could've used VWAP (Volume Weighed Average Price) but we do not have the luxury of achieving these data, particularly for free and better yet if in real-time. But as you know, we fund this "pet" project and we are just a very tiny team who just play stocks and share our expertise. we are not multi-millionaires here :p 

ᐈ Astrology stock illustrations, Royalty Free astrology vectors ...

First let's start with this... The market (specially the PSE) is emotions driven! if you do not agree or is curious why ASTRA feels that way, please first check out our previous article on the matter here. For ASTRA, the stock market is like a board game with rules, a playing field and players. Players determine the trade types and politics of it. As with almost all things in life, it believes the game is also manipulated! Anything that can be gamed will be gamed and the more money there is to gain doing so without repercussion, the more enticing it is to do so.

For ASTRA, the market is "NOT LOGICAL" because if it was, Fundamental Analysis would have been correct 80% to 90% of the time. We are not discrediting the importance of fundamentals but ask yourself this... do you trust companies file their quarterly reports completely and honestly? No bloating of figures? No magic accounting involved? no bribing of officials auditing their cooked books? and when these are discovered... what happens? company can just basically "apologize and promise to do better next time". So basically, there is no true risk and more to gain when you play dirty. Sad to say this but we will not blind ourselves just for the sake of sounding nice... This is the norm in the Philippines and until we implement strong punishment for such practices, this will always be the norm and fundamentals are theoretically useless when trust is almost 0.

Bob Jensen's Accounting Theory Summary Part 1

So if fundamental analysis fails here, what works is "trend/sentiment analysis" as we Filipinos are "emotionally driven". What triggers us are hypes and fears, booms and busts, pump and dump, and so on... any good news we start to rally and any bad news we sell like its the end of the world. BTW! We will not blind you guys to the idea that everything is predictable and sensible. As long as there are Human Factors (Emotions) the market will only make sense to those who understand human behavior and how to predict their actions. The ASTRA project aims to understand trends of trader behavior, manipulation events and how it can predict potential optimism and pessimism in trade activities. 

Daily market values
[For those who already understand price HIGH, LOW, OPEN and CLOSE(LAST) you may skip this paragraph as it is intended for those new to stocks.]
Everyday after trading hours and market has closed, the stock market summarizes the daily results indicating the following

  • High - The highest price of the stock on the trading day
  • Low - The lowest price of the stock on the trading day
  • Open - The initial price of the stock on the trading day
  • Close/Last - The last price of the stock on the trading day
all these data can be used as a whole to see trends (i.e. using the candlestick chart). We will not delve too much on explaining these as there are more guides on using these online and our focus is more into our own methodology on measuring/scoring the "actual day value""

The X-Price
Most analysis revolved around the "Last price". We are not saying its wrong but in our case, it never did us any better because like we said "The Market is rigged!"... Theoretically, most volumes of trade should happen "in-between" the trading hour. But there are lots of instances (specially in the PSE) where the trade actually happens on 2 particular periods... the Open and Close. This usually happens (in our point of view) when people want to manipulate the stock. opening prices where a spike in volume causing massive buying will trigger people to want to ride the wave due to FOMO (Fear of missing out). An example of this happened just this early May of 2020. ABSCBN was ordered to shutdown, that night forums are hyping to buy GMA7 (its competitor). This however has no basis other than FOMO Greed and Human Emotions. In just a span of 2-3 days, people who jumped in lost 30% of their money.

The opposite is true when these entities oversells shares early to cause panic selling (with the objective of buying them back later cheaper). Also when done on the last trading minute, the people who are not active will normally use the "Last Price" as a deciding factor on its value.

Hence we utilize a 5th price (The X-Price) which is a weighted value based on the 4 values mentioned above. The X-Price does not fully trust each values entirely and tries to guess the daily average based on these 4 data. The forumula is ran as such (simplified for understanding purposes only):

  1. First we impute the value based on the open and close where the weighed is geared more towards the closing price. XPRICE_1 = ((LAST_PRICE x 2) + OPEN_PRICE) / 3
  2. Then using the High and Low price, add it to twice that value and divide by 4.
    XPRICE = ((XPRICE_1 x 2) + HIGH_PRICE + LOW_PRICE) / 4
The X-Price as can be seen, tries to estimate where within the day value the real average is and not listen to its "edges" alone (LOW, HIGH, OPEN or CLOSE). First we "averaged" the open and close price with weight geared towards the LAST/CLOSE price. Then, using this value, We added in the HIGH and LOW value wherein the OPEN-CLOSE average is given higher weight. Not too complicated right? See the table below to see how the X-PRICE will appear and how it makes a more sensible price range to lessen the trading day's noise.

 15 30 2025  22.92
 5 30 20 30 22.08
 20 50 20 23 28.5
 5 40 20 40 27.92

As can be seen in the results above, no single value dictates the "possibly true day value". Each one can pull the amount in the opposing direction where the weight is geared primarily on the LAST trade value, then OPEN value and the HIGHs and LOWs.

Use Cases
The X-Price basically helps you see what would make a "xensible" price for that day, meaning the next trading day, there is high probability that the price range will hit this value. Its use is enhanced with the XMA (Price X Moving Average) and XVWMA (Price X Volume Weighed Moving Average) which are some of the unique metrics provided by ASTRA. Moving forward, note that any metric or data you will find on this system with an 'X' simply means it was determined using this X-Price. (i.e. priceX5dMA, priceX5dVWMA, priceXChangeVal, etc. our moving averages and most graphs will focus on this as well and not on LAST trade prices)

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