Getting Started with PowerRatings

Last Thursday, the Dow Industrials fell nearly 400 points on widespread fears that the subprime mortgage credit fallout will spread to other areas of the economy, and significantly damage overall economic growth. On Friday, the Dow fell over 200 points before closing fractionally lower. In a situation like this, with the major indexes making huge gains and taking huge losses in the span of just 2 days, what can you do to gain an edge in the market? (Here's a hint: Don't watch the television for ideas!)

TradingMarkets offers a proprietary stock rating method called PowerRatings (for Traders). This method ranks stocks 1-10 and the higher the rating, the greater the one-week historical gain has been. Stocks rated 9 and 10 have outperformed the average stock by 12 to 1 since 1995 and ideally are the stocks to focus on each day. Stocks rated 1 and 2 on average have lost money, and you want to know these stocks in order to avoid them. To validate PowerRatings performance, more than 8.2 million daily trades were looked at from Jan. 1, 1995 to Dec. 1, 2005 -- over 10 years worth of data. The results are based on the average 5-day performance.

Last week, we highlighted a few potential trade ideas, pointing out what the stock's PowerRating was at the time, and how the stock had been performing lately. Just on Friday, we had two big winners which we chose solely on their PowerRatings. We do not look for things like earnings or news; we look for time-tested, historical edges which are backed by hard data.

United States Cellular and Commscope were both featured in our list of Top 25 PowerRatings Stocks article (Wall Street's Wild Ride - Are You in the Right Stocks?) last Friday. Let's see how they have performed since-

United States Cellular (USM | Quote | Chart | News | PowerRating)

United States Cellular (USM | Quote | Chart | News | PowerRating) had a PowerRating of 8 on Friday. The stock had been pulling back from a new all-time high set earlier this month telling us that it has had some major momentum propelling it higher, also it had one year gains of 33.6% on Friday.

In Friday's session, USM rocketed up 15 and a half points (nearly 20% gain) to close at $94.75.

Commscope (CTV | Quote | Chart | News | PowerRating)

Commscope (CTV | Quote | Chart | News | PowerRating) had a high PowerRating of 9 on Friday. This told us that it was in position for a potential bounce. The stock was also up 53% since January and was pulling back from its all-time highs set back on July 12, 2007.

CTV shares ramped up 10.6% ($5.24) in Friday's session to finish at $49.52.

Please note that these are not typical trades for high PowerRating stocks, but do display the potential gains of our PowerRatings stocks. Let's delve into our historical research that covers 8.5 million trades over the past decade (January 1995 through September 2006) and looked at over 3,000 big-cap, mid-cap, and small-cap stocks.

How to use PowerRatings

So now that you know what PowerRatings are, the obvious question is "How do I use them?" Ideally, stocks rated 9 and 10 are buying candidates, and stocks rated 1 and 2 should be avoided.

There are numerous ways you can use PowerRatings in trading. To get started TradingMarkets has published a strategy guide and since the launch of PowerRatings numerous daily strategy articles have been written. Possibly the most useful feature of PowerRatings is that they can be used in conjunction with almost any trading strategy you employ, allowing you to combine a discretionary form of trading with quantified research.

All of this information can be accessed for free, however, subscribers will also be able to use a number of additional features:

• Top 25 PowerRatings Stocks
• Stocks To Avoid
• Biggest PowerRatings Up Changes
• Biggest PowerRatings Down Changes
• PowerRatings for all the S&P 500, NASDAQ 100 and Dow 30
  
  And many more...

We're sure that once you start using PowerRatings you'll be as excited by them as we are, whether you use them as a stand alone product, along with one of our TradingMarkets systems or combine them with your own strategies to make them even more powerful.

Start your 7-day Free Trial and see how PowerRatings (for Traders) can improve your trading.

You can also attend a free class on how to use PowerRatings presented by Steve Primo, our Director of Education.