Weekly Wrap - BAP Understanding

Hi Team,

Quick question on Below Action Price. I see in the Weekly Wrap out this morning, that DIS in the US market, and WOR in the ASX market have come up as additions to the portfolio’s due to being BAP.

However, my understanding around BAP is that both of these are above the BAP (“just” in the case of WOR).

Can you please confirm these for me, or is this an error on the SWS side?


Hi Graeme,

Thanks for the query.

Gary executed a trade in DIS.XNYS on Friday evening (AEST) with a BUY price below its action price of $130.82. (Can confirm the actual BUY price in tonight’s download if you like).

He also executed a trade in WOR.XASX this morning with a BUY price of $9.62 - so was below its action price of $9.66.

Both these entries will reflect in the Public Portfolios when downloaded after this evening’s update.

Trust this helps, and any further questions, please don’t hesitate to ask.

Hi Karl,

Thanks for your prompt reply.

My query still exists based on the investment plan say, for example, the ASX Equal Weighted Portfolio.

“In the absence of new entry signals or missing a recent entry signal, new positions may be taken in any currently open trade providing its current price is lower than the close price of the bar one day after the original signal. That is, the current price is below the Action Price as shown in Beyond Charts and the SWS App”.

From my Beyond Charts on Friday night, it shows WOR had a close price on Friday evening (4/9) of one cent ‘above’ the Action price on Thursday (i.e. $9.67 vs. $9.66), and as such, unless I was manually trading the open, I would not have known that during the open it would go under the action price. Based on my understanding of the investment plan above, WOR would not have even been a viable selection for Monday’s open?

I also note that today, whilst WOR did go below the action price, it closed at $9.72, and as such, still has not technically ‘closed’ below the action price. The only times that WOR could have been a viable trading option in the period since the initial signal would have been on the morning after 28/8 or 1/9 based on my understanding (assuming I had open positions available at that time).

For DIS, the action price is $130.82, but the close on Friday night was $131.99. So again, by my understanding this trade is currently not a viable option. The last time I would have thought it was a viable BAP opportunity was the session the day after the 25/8 (where it closed at $129.79). Since then, shouldn’t it have been off the table?

Sorry for the follow up question, it’s just that I use the same rule as above in both my US and ASX Trading plans, but did not take these trades (WOR / DIS) as the close was not below either action price, so just double-checking my own understanding of the rule.

Much appreciated.



Your reading of the Investment Plans, as the words are currently stated, is correct in that to place a Buy Order, when there is available capital, should occur when the current close price for a stock is at or below the Action Price for an Open trade that is not currently in your portfolio.

This ‘close price’ clarification of the BAP rule was added recently, well after the BAP rule was first included in the SPA3 Investor Investment Plans a few years ago.

It looks like further clarification is needed in the Public Portfolio Investment Plans as we haven’t clearly stated the intention of the rule for the close price to be below the Action Price (upon review tonight it should also state “at or below”).

Firstly, while we are discussing clarity :), entering a position intraday when the price dips below the Action Price doesn’t make the trade “unviable”. I know ‘viable’ is merely a choice of word but just need to be clear.

Secondly, to clarify the intention of the rule to place a BAP order at all.

Going right back to the basic logic of the BAP rule:

  1. The SPA3 Investor (& Trader) Edge has been researched using the close price on the day after the entry signal (= Action Price) to calculate the Edge. This premise has been used for all research by SWS since I started researching a mechanical system back in1995.
  2. If you are prepared to risk capital at the Action Price on the day after the signal then it is logical to do so at that price or lower at a later date, provided an Exit signal hasn’t occurred.
  3. The intention of any investment system that has a positive edge, is to maximise Exposure according to the Entry & Exit signals of the system, which means to take every opportunity to get capital in the market.

Hence the BAP rule. This rule has existed in SPA3 Trader for approx. 20 years WITHOUT the close price needing to be at or below the Action Price in Beyond Charts. An intraday dip below the Action Price or well below it.

Now to further clarify the BAP rule as it is presented in the Investment Plans with the recently added ‘close price’ specification.

One of our upcoming developments is to add “BAP Signals” into the SPA3 Investor Scan in Beyond Charts and hence to the SWS Alerts APP. Not imminent, but a high priority on the list.

To determine which stocks qualify to be signaled as a BAP in the BC Scan and the SWS APP, the rule needs to be completely unambiguous. Hence the inclusion of the current close price being at or below the Action Price.

That said, it doesn’t preclude any SPA3 Investor who has the vigilance and know-how to include in their Investment Plan to place a BAP Limit Order at or below the Action Price to have an entry triggered intraday. Even when the current close price is > the Action Price.

This means that you may miss the odd occasion that this occurs. But you may have an opportunity to enter at a lower price in the future. Or you may have other signaled trades come along, fill your portfolio and be profitable while DIS and WOR end up losers. “There is a random distribution…”

The overriding mechanical rule is that a BAP trade entry price MUST be at or below the Action Price.

So why did I do these trades with DIS and and WOR? I was merely doing what I have always done out of habit according to SPA3 Trader and SPA3 Investor Investment Plans over the last 20 years.

This doesn’t make the trades unviable. Nor does it invalidate the Edge or the results of the Public Portfolios.

But you are correct, the current Investment Plans were updated earlier this year with the ‘close price’ validation.

We will discuss further internally clarifying the BAP rule and the ‘close price’ criteria.

The intention of the BAP is to maximise Exposure in conjunction with the RS and 2% criteria to easily and objectively identify the next trade to take when there is available capital to invest in a Portfolio.

I encourage SPA3 users NOT to use the EXACT same Investment Plan as the the Public Portfolios, but to rather use them as a starting template and then build from there.

Thank you for your question Graeme.

Trust this helps.

Hi Gary,

Thanks for the detailed response, much appreciated, and apologies for my use of the word unviable.
Of course, if you have the available time and inclination to be trading during the session, then of course it’s a viable trade if the price dips below the action price, or you have a limit order in place (but are therefore prepared to possibly not enter the trade, to the possible exclusion of another, if your price is not filled).

In fact, the only reason I noticed this at all is that in the Weekly Wrap video on Monday, at the 2:00 minute and 2:30 minutes marks it clearly shows all available BAP options for both markets, but then at the 3:00 minute mark summary, it then showed WOR and DIS being placed, which weren’t part of those BAP options! Good news here is that I’m clearly paying attention to the videos put out by the team each week!

From my perspective, and based on your teachings which I 100% agree with, I simply want to have unambiguous rules in place, and whilst I do have variations written into my trading plan for =<2% trades and RS BAP trades, the ‘starting point’ was always the close of the previous days trade, as I don’t have the opportunity to intra-day trade, and so my Trading plan is therefore based around this fact.

I’ve also taken your advice and modified my plans from ‘below the action price’ to ‘at or below’ as suggested, as this certainly could be a potential question mark for me if WOR had been 1c lower at the close on Friday!

Thanks as always for your and the teams ongoing support in the many ways SWS provides their customers help along this journey.



Had a chuckle about paying attention in the Weekly Wrap. :slightly_smiling_face:

Your point about not entering the trade at the possible exclusion of another is a good one. If there is only one choice in any given situation then it’s not a problem.

But if there is a choice of two or more and they are all slightly above the Action Price, then this could happen if there is no access to the market intraday on that day.

Just have to wait for the next opportunity. It could be one of those just missed. Or a better opportunity a few days later. The intention is to use you skills and means to maximise exposure according to the rules. Of course, “one could get away”.

I know that you understand all this. Elaborating for other readers benefit.