How It Works

Every EthicoIQ signal passes through the same disciplined pipeline: quantitative scoring, ethical screening, and probability validation. Transparency is the only acceptable default for any research platform — here is exactly how each number on this site is produced.

1. The EthicoIQ Opportunity Framework

Every score EthicoIQ publishes is organised into a single four-layer framework. The layers are combined into an Opportunity Score (0–100) and the Score is accompanied by separate metrics (Confidence, Risk, Entry Quality, Exit Quality, Position Size, Portfolio Impact) so users can see not just how attractive a setup looks, but how reliable the signal is, how much downside is embedded in it, and how it fits their existing portfolio.

The four layers and their default weights:

• Market Regime (25%) — index trend (200-DMA), market breadth, sector strength, volatility regime, liquidity conditions. Prevents buying strong stocks into weak markets.
• Company Quality (30%) — revenue growth, EPS growth, ROE, debt-to-equity, free cash flow, institutional ownership, relative strength. Removes fundamentally weak names that only look good on technicals.
• Technical Timing (25%) — RSI, MACD histogram, ADX, Supertrend, EMA alignment, breakouts, volume confirmation. Determines the when, only after the regime and quality filters have already passed.
• Risk & Reward (20%) — ATR stop-loss placement, minimum 2.5:1 reward-to-risk, position sizing, portfolio exposure caps, correlation between holdings, trailing stop discipline.

Opportunity Score = 0.25 × Regime + 0.30 × Quality + 0.25 × Timing + 0.20 × Risk. The composite is intentionally weight-heavy toward Quality because many profitable strategies win only 45–55% of the time yet make money because the winners are much larger than the losers.

Separate metrics reported alongside the Score:

Adaptive weights — the layer weights above shift by regime:

Calibrated categorical language. Rather than publishing raw predicted probabilities like "82% chance of outperformance", the framework reports historically-calibrated categories derived from backtesting:

• 90–100 — Historically among the strongest setups in the tested dataset
• 80–89 — Historically above-average performance
• 70–79 — Moderate-quality setup
• 60–69 — Mixed historical results
• Below 60 — Historically weaker setups

These labels describe how similar setups behaved in historical data. They are not forecasts, guarantees or expected returns. No formula can eliminate losses across all market conditions; even sophisticated quantitative funds experience losing periods. The framework aims to improve expected risk-adjusted returns over many trades through a robust scoring model paired with disciplined risk management and ongoing recalibration.

2. The EthicoIQ Score (Signal Engine — Current Timing Layer)

Every tradable asset receives a 0–100 EthicoIQ Score derived from a proprietary 7-factor model. Higher scores indicate stronger alignment with the model's technical criteria across momentum, trend, volatility, liquidity and risk/reward characteristics. The score measures current market conditions as interpreted by the model and is not a prediction of future performance.

• RSI (14) — overbought/oversold momentum.
• MACD — trend acceleration vs deceleration.
• Volume Surge — institutional participation gauge.
• ATR — volatility-adjusted entry & stop spacing.
• EMA 20/50 — trend regime confirmation.
• R/R Quality — reward-to-risk ratio at proposed levels.
• Kelly Criterion — a mathematical position-sizing component used to estimate theoretical capital allocation under model assumptions.

Verdict bands map to ranges (95+ Strong constructive, 75–94 Constructive, 60–74 Neutral, 40–59 Weak, <40 Avoid). These bands describe model alignment with its input criteria — they are not certainty levels or expected-return categories.

3. The Core Wealth Creator Score (V3.0 — Current Quality Layer)

Long-horizon wealth-creation candidates are scored on a 0–100 Core Wealth Creator Score. The score is calculated from 10 weighted pillars and supplemented by several qualitative overlays that influence the final classification. Outputs map directly onto the V3.0 Classification ladder:

• Exceptional Opportunity — 95–100
• Wealth Creator — 90–94
• Growth Leader — 80–89
• Emerging Winner — 70–79
• Watchlist — 60–69
• Low Conviction — <60

Weighted pillars (100% total):

• Revenue Growth (20%)
• Revenue Acceleration (10%)
• EPS Growth (15%)
• EPS Acceleration (10%)
• Free Cash Flow Growth (10%)
• Relative Strength (10%)
• Institutional Ownership Trend (10%)
• ROIC / ROCE (5%)
• Balance Sheet Strength (5%)
• Quality Score (5%)

Qualitative overlays (may adjust classification, not the weighted composite):

• Piotroski F-Score (financial health)
• Catalyst detection (new orders, capex, regulatory clearance)
• Promoter pledge
• Insider activity
• Sector momentum
• Volume confirmation

The model evaluates multiple market scenarios (Bull, Base and Bear) and produces statistical outcome ranges derived from historical data and model assumptions. These outputs are analytical estimates for decision support only and should not be interpreted as forecasts, investment advice or expected returns.

4. Data Sources

• Live quotes: Yahoo Finance (primary) + Kite Connect (Zerodha) + RapidAPI fallback.
• Fundamentals: Company filings, exchange disclosures, audited financial statements and publicly available market data — supplemented by Perplexity Sonar hydration for missing fields.
• Macro flows: NSE provisional FII / DII data.
• Surveillance: BSE Attention Investors list — flagged stocks have all BUY-side signals suppressed.
• Crypto / Commodities: Coinbase Spot, Yahoo Finance futures.
• AI commentary: Anthropic Claude (Sonnet 4.5) via Emergent.

5. Update Frequency

• Live ticks: every 60s during market hours.
• EthicoIQ Score: continuously during market hours.
• Wealth Creator Score: cached 1h per symbol; full leaderboard recomputed nightly.
• Fundamentals hydration: weekly — Saturday 04:00 IST.
• BSE watchlist refresh: weekly — Monday 08:00 IST.
• AI verdicts: 24h cache; force-refresh available on the stock detail page.

6. Ethics Screening Framework

Every asset is independently screened against five ethical criteria — see the Ethical Investing Guide for the full rules. Non-compliant assets never enter the signal stream.

7. Monte Carlo Probability

For each long setup we run Monte Carlo simulations that generate thousands of potential price paths using the symbol's historical volatility and return characteristics to estimate the likelihood of hitting each target (T1, T2, T3) before the risk limit under model assumptions. The displayed probabilities represent statistical simulations of past return distributions — they are not predictions of future market behaviour and should not be interpreted as expected returns.

8. Model Limitations

• Scores reflect public information only. They cannot capture private information, sudden regulatory action, fraud, or black-swan macro events.
• Model outputs depend on the quality, completeness and timeliness of third-party market data.
• Significant market regime changes may reduce the effectiveness of historical relationships used by the model.
• The Wealth Creator Score is calibrated primarily on Indian large/mid-cap history. Micro-caps, new listings and illiquid stocks are inherently less predictable.
• Live tick prices may be delayed or estimated when upstream feeds are throttled.
• AI-generated commentary summarises quantitative model outputs and publicly available information. It may contain inaccuracies and should not replace independent research or official company disclosures.
• Past algorithmic accuracy is no guarantee of future results.

9. Final Disclosure

Investors should conduct their own research and consult a SEBI-registered investment adviser before making investment decisions. Capital is at risk. EthicoIQ assumes no liability for any investment decision taken on the basis of the information shown on this platform.