The three-thumb rule – An Andre Stagge favourite
About the three-thumb rule
The three-thumb rule is showcased by trader and investor Andre Stagge. The rule has its origins in institutional asset management. Andre Stagge regularly uses this rule to select assets, determine the trend, and even uses it as a buy (short sell) signal. The rule consists of three criteria. When all three criteria point in one direction a market is interesting.
In this store pack
1. Special three-thumb rule charts (link to your quote board and click)
2. A Nasdaq 100 stocks screener
3. A SignalRadar table showing live trades
This example shows a day chart on the stock of hotel chain Marriott. The green background corresponds to three thumbs up. Buyers pay attention! The red background corresponds to three thumbs down. Short sellers, these are your opportunities.
The three criteria
Rule 1
Rule number 1 compares the market price on 5 January with the market price on 31 December of the previous year. If the 5 January price is higher than the 31 December, it is a thumbs up. If the 5 January price is lower, it is a thumbs down. Because the 5 January price is compared to the 31 December price, this criterion is fixed for the year.
Rule 2
Rule number 2 is based on the 200-day moving average line. Professional investors call this line the concrete line. They consider a break-through of this line very important. When the market price is above the 200-day moving average, it is a thumbs up. A market price below the 200-day moving average is a thumbs down.
Rule 3
Rule number 3 compares the current market price to the market price on 31 December of the previous year. When the current market price is above the 31 December price, it is a thumbs up. Thumbs down if the current market price is below the 31 December price.
This example shows a day chart of Bank of America stock. The green background indicates all criteria are positive. The red background indicates all criteria are negative.
Also in the chart
- The sum of all three criteria is visible below the main chart. It is a value between +3 (= all criteria are positive) and -3 (= all criteria are negative).
- A target line at +10% and thereafter at every +5%. These lines can be used to place orders on.
- A stop loss line of -5%.
This example shows a day chart of Meta Platforms stock. The criteria are at +3 (all positive, thumbs up) and the chart background is green. The percentage lines allow traders a quick impression of how the market price evolved after a signal appeared.
SignalRadar and Screener
The SignalRadar table shows live trades based on the three-thumb rule.
The screener shows Nasdaq 100 stocks with a buy or short sell signal.
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Open an accountConclusion
The three-thumb rule as promoted by André Stagge can be used on all instruments. The rule is used to select assets to invest in, to determine the trend and even as a buy or short sell signal. The target and stop loss lines allow traders to evaluate the performance of every signal.
Tip: link the chart to your quote board, and click your selected instruments one-by-one.