Trade Apgar is a concept described by Dr. Alexander Elder in his book “The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management“. 

Apgar score is a measure of the physical condition of a newborn infant. It is obtained by adding points (2, 1, or 0) for heart rate, respiratory effort, muscle tone, response to stimulation, and skin coloration; a score of ten represents the best possible condition. Dr Elder’s idea was to adopt this concept for trading.

This system can be developed according to your trading style and indicators that you use. It should also change according to the trading strategy that you want to deploy.

After I came across to this concept, I started applying it to my screening process of potential option trading opportunities. This exercise made me realize how blindly I was executing option trading, solely relying on probability, without considering market trend and market conditions.

Trade Apgar Screening Method

There are 5 indicators I use for Trade Apgar.

  1. 50 days and 100 days moving average
  2. MACD
  3. Money Flow Index
  4. TTM Squeeze
  5. Directional Movement Indicator (DMI)

In the example below, I wanted to Short AVGO and the Trade Apgar indicates 7 points out of 10 (red arrows).

It is important to note that Trade Apgar method is subjective because in your mind, you are hoping the stock to move one of the directions (up, down, or sideway). One method to overcome this is to count the Trade Apgar points quickly without analysing too much. This will allow you to count ONLY the obvious signals and not trying to see something that do not exist on the chart.

Step 1 – Check the weekly chart

The weekly chart is analysed first to see if I am betting against the current trend.

Using the AVGO below as an example, it’s clear that the stock is in an uptrend but three indicators show that it is in a slight pull back. This tells me that if I am wrong (I want to short it), I should get out ASAP because AVGO is still in an uptrend.

1) 50 days and 100 days moving average

The bars are way above the moving averages. – Zero point.

2) MACD

Both the line graph and bar chart are showing a downtrend. I would give one point if either one of these are in agreement with the direction I am interested in. In this instance, both are. – One point.

3) Money Flow Index

It showing overbought. – One point.

4) TTM Squeeze

No apparent sign in agreement with the short direction. – Zero point.

5) Directional Movement Indicator (DMI)

The pink line is above the green. Not a strong trend but nonetheless it is showing a downtrend. – One point.

Step 2 – Check the daily chart

The daily chart will give me a shorter term prediction.

1) 50 days and 100 days moving average

The bars are touching the moving average. – One point.

2) MACD

The line graph is showing a downtrend. – One point.

3) Money Flow Index

It showing overbought. – One point.

4) TTM Squeeze

It’s going down – One point.

5) Directional Movement Indicator (DMI)

The pink line is below the green.  – zero point.

AVGO Trade Apgar Example

Does Trade Apgar Work?

To answer this question, I have compiled my previous directional option trading data.