Unlocking Momentum Opportunities with Rules-Based Precision

Introduction

In an era where systematic, transparent methodologies differentiate winners from the noise, the Global Clear, Transparent Stock-Selection Engine (GCTSE) offers a blueprint for rigorous, repeatable momentum-based equity selection. Designed for wealth managers, asset allocators, and proprietary trading desks, GCTSE integrates quantitative momentum scoring with qualitative catalysts, multi-timeframe confirmation, and GATS-aligned risk controls.

0. Early-Warning Signal: Daily EMA 8/50 Crossover

Timeframe: Daily (M1440)
Mechanism: EMA 8 crossing above EMA 50 on the daily close signals a nascent bullish regime.
Purpose: Primes the watchlist by identifying stocks shifting toward up-trend structure, without triggering premature entries.

1. Data Ingestion & Preprocessing

• Universe: 28 handpicked U.S. equities from major indices.
• Data Sources: Institutional-grade APIs for adjusted daily closing prices.
• Adjustments: Corporate actions (splits/dividends), gap fills, outlier screening to ensure data integrity.

4. Qualitative Catalyst Filters

From the top 10% by composite score, apply stringent overlays:

• Earnings Revision Momentum: ≥1 upward estimate revision last quarter.
• Sector & Macro Themes: Alignment with structural growth drivers (AI, cloud, consumer reopening).
• Event Risk Screen: Exclude names with pending litigation, regulatory probes, or uncertain M&A.

Filtered names form a high-conviction pool (7–10 candidates).

5. Final Selection

Select the top 7–10 stocks post-filter for inclusion in the candidate universe, balancing momentum strength and thematic conviction.

6. Entry Execution: Four-Hour Trade Signals (M240)

Precondition: Daily EMA 8/50 cross has occurred, and daily MACD(15,25,8) > 0.

On each 4-hour bar close, enter when:

• MACD(15,25,8) > 0
• Ascending EMA-Zone Alignment: EMAs 1–8 > 9–15 > 16–25 > 26–50 > 51–89
• HAS Candles above DAATS
• I-Trend: Green line > red line
• ADX > 15
• GMACD Bullish

Execute at the open of the next M240 candle upon signal confirmation.

7. Position Sizing & Risk Controls

• Unit-of-Risk: 1% of portfolio per trade.
• Primary Trailing Stop (M240): 10 × ATR(89)
• Secondary Back-Stop (Daily, Optional): 15 × ATR(200)

8. Backtesting & Governance

• Walk-Forward Analysis: Rolling 3-year in-sample / 1-year out-of-sample tests.
• Transaction Cost Modeling: 0.10% fees + 0.05% slippage.
• Performance Metrics: Sharpe ratio, max drawdown, win rate.
• Review Cadence: Quarterly recalibration and performance review.
• Documentation: Versioned rulebook with audit trail for all parameter and rule changes.

About the Author

Dr. Glen Brown is President & CEO of Global Accountancy Institute, Inc. and Global Financial Engineering, Inc., with over 25 years of expertise in quantitative trading, financial engineering, and algorithmic strategy design. He spearheads the development of the Global Algorithmic Trading Software (GATS) and thought-leading frameworks like GCTSE, emphasizing transparency, data-driven rigor, and robust risk controls.

Risk Disclaimer

This article is for informational purposes only and does not constitute investment, legal, or tax advice. The performance of GCTSE, like all trading systems, carries risks—including market volatility, execution slippage, and model limitations. Past performance is not indicative of future results. Consult qualified professionals before implementing any aspect of this framework.

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