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What is Four Sigma Trading?
This is a stock picking system developed over several years (the data here goes back to 1995). It essentially finds stocks that are making a statistical breakout over the recent trading period. The stocks it picks are making abnormal moves to the upside which is probably getting the attention of a lot of people and gaining momentum. The statistical method is something similar to a Bollinger Band, but we've found it to be more accurate. The system only uses data at the end of the day, so this is not a day-trading system.

Check out our new Industries Sigma Area?
We've averaged the current sigma values for all of the industry groups. Click on the group and find all of the stocks that make up the group and their individual sigmas. This is a great tool to find hidden gems in the market. Find out more here >>

What do the Numbers in the Yellow Box Mean?
To the right, you will see the current system results snapshot which shows the current returns as of the last data upload for this current year.

Two interesting numbers are the "Current Market Sigma" which is the average of all of the stocks' sigmas in the market and "Current VIX Sigma" which is the sigma of the current VIX reading. We watch these numbers because if the average sigma of the market is down and the VIX is up, then the market is very unfavorable for a long stock position (but may be favorable for a short position).

We also list the Top Ten Sigmas, which is a list of stock making strong moves to the upside, and the Bottom Ten Sigmas, which is a list of stocks making strong moves to the downside.

So How Does It Work?
Computers search the entire stock market each evening for a specific trading pattern that we've found has a good chance of a short term rise in price. Once a stock is signaled, the system will open a trade if it continues to trade higher the next day. The system ignores stocks that make large gap up moves to the upside on the signal day since we've found they typically lose momentum faster or are the result of buyouts or other factors that can keep the stock from moving up.

How to Get Out?
Once the position is open, we hold it for 50 days and then sell it. Why 50 days? We found that this is about enough time for the stock to make its short-term move so we can cash out and move on to something else. We're always looking for a more efficient way to profitably get out of a stock, so if you have any ideas, please let us know on our contact page.

What are the results?
Each year is different, but since we've been keeping track, the system has averaged about 19% (pretax) every 50 days since 1995, but that included some very good years from 1995 to 1999 when the stock market itself averaged 25% each year. Since the year 2000, when the market began having a rough time averaging just about a 3% gain each year and we've averaged about 10% every 50 days with one losing year. That's not to say there isn't volatility. The sytem is picking stocks that gain a lot of attention from the market and can have some swings that not every investor can stomach. We think investing a small portion of a portfolio in this strategy can give you the edge you need to beat the market.

What Does the System Cost?
Only $39 gets you an annual subscription and stock picks emailed to you each time the system signals a trade as well as full access to all of the System's trading history. Questions and ideas are always welcome on our contact page.

The Fine Print... Everything provided at foursigmatrading.com is provided for educational purposes only. We may hold positions in the stocks or industries discussed here. As always, you should seek the advice of a financial advisor before investing. This information is NOT a recommendation or solicitation to buy or sell any securities. Please read our legal disclosure, terms and conditions here.

  View the Blog...
Results Snapshot
Overall Gains in 2009
FourSigma System 10.12 %
ThreeSigma System 11.60 %
Current Market Sigma: 0.09
Current VIX Sigma: -0.38
Top 10 Sigmas For 09/04/09
SymbolClosing PriceSigma

Bottom 10 Sigmas For 09/04/09
SymbolClosing PriceSigma
Capital Goods & Svc: 0.22
Consumer Goods: 0.28
Consumer Services: 0.33
Energy: 0.16
Financial: 0.06
Health Care: -0.28
Materials: 0.55
Technology: 0.03
Telecommunications: -0.19
Utilities: -0.71

Sigma measures an overbought or oversold condition; enter your stock symbol and find its sigma value...