Screening Equities by Trading Range, ROE, and Best-Level Order Imbalance

Summary

This proposed equity screen combines a price range condition, sustained profitability, and a snapshot of order book demand. It selects stocks whose high minus low is at least one unit, whose return on equity exceeds 15% in each of the prior five years, and whose best bid volume is greater than best ask volume. The article presents the criteria as a combined technical, fundamental, and market microstructure filter and includes example formulas for implementing them.

The source cautions that price based indicators can change quickly and that best-level bid and ask volume may give misleading signals when considered alone. It suggests supplementing the screen with valuation, financial strength and growth analysis, along with additional technical and quarterly or policy context. No backtest, portfolio construction method, holding period, transaction cost analysis, or return evidence is supplied, so the criteria should be treated as a screening idea rather than a validated trading strategy.

Key ideas

• The screen requires a high-low price range of at least one unit and five consecutive years of ROE above 15%.
• It also requires best bid volume to exceed best ask volume at the observation time.
• The criteria combine price behavior, company profitability, and a limited order book measure.
• The source warns that the order volume comparison can mislead and recommends broader fundamental and technical review.
• No performance test or trading and portfolio rules are provided.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.