Go with the WINNERS

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vetten

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hello folks,

I`ve been thinking about a strategy for a while that seems interesting to me.

the stocks to choose from would be the S&P500 or Ftse100 for liquidity reasons.

Scan the S&P500 for stocks that have gone up the most in the last month.

Look at the charts and buy the top 10 that have quite a smooth chart where prices are not
all over the place.

Could even choose stocks that are over say $ 20 to minimise broking costs i.e. IB

Place a strict stop loss @ 3-5%, because after all we only want stocks that go up more
almost immediately after purchase.

Everyday after market close we scan for the next batch of uptrending goodies and sell
any that fall out of the top 20 (to give a bit of breathing space).

We replace those sold after hitting the stop loss and those disappearing from the top 20
list.

My feeling is that 30-50% p.a. could be made with this system after optimizing, but maybe
I`m totally wrong.

A short system could be set up in reverse,.
Probably more to be market neutral than for the big profits.

I dont want to reinvent the wheel and is there anybody out there that trades a simular system?

Anybody that has done some backtesting of a simular system?

thanks for the feed back :)
 
vetten said:
hello folks,

I`ve been thinking about a strategy for a while that seems interesting to me.

the stocks to choose from would be the S&P500 or Ftse100 for liquidity reasons.

Scan the S&P500 for stocks that have gone up the most in the last month.

Look at the charts and buy the top 10 that have quite a smooth chart where prices are not
all over the place.

Could even choose stocks that are over say $ 20 to minimise broking costs i.e. IB

Place a strict stop loss @ 3-5%, because after all we only want stocks that go up more
almost immediately after purchase.

Everyday after market close we scan for the next batch of uptrending goodies and sell
any that fall out of the top 20 (to give a bit of breathing space).

We replace those sold after hitting the stop loss and those disappearing from the top 20
list.

My feeling is that 30-50% p.a. could be made with this system after optimizing, but maybe
I`m totally wrong.

A short system could be set up in reverse,.
Probably more to be market neutral than for the big profits.

I dont want to reinvent the wheel and is there anybody out there that trades a simular system?

Anybody that has done some backtesting of a simular system?

thanks for the feed back :)
Click to expand...


Hello Vetten,

If you look at the stock screens at aaii.com, although they're mainly based on fundamentals, lots of the screens have a relative strength filter - in fact all the best ones.

The best performing screen of all is a simple one which screens for stocks with a cap of greater than 20M, a price to sales of less than 1.5 and relative strength over 52 weeks ranked in the top 20. This portfolio is re-balanced each month to give returns in the region of 30% PA (check these facts, this is all from memory). Many other filters use 13 week and 26 relative strengths - but none look only at 1 month - though that's not to say this doesn;'t have merit.

I trade on similar lines, with both UK and US stock. I don't trade the short side as backtesting this increased the volatility of returns and didn't offer the protection you might expect in the event of a 9/11 type situation.

Maybe better hedge your portfolio outright and except a market average"8%" reduction against your 30%, and maybe apply leverage?

Cheers,
UTB
 
Last edited:
the blades said:
Hello Vetten,

If you look at the stock screens at aaii.com, although they're mainly based on fundamentals, lots of the screens have a relative strength filter - in fact all the best ones.

The best performing screen of all is a simple one which screens for stocks with a cap of greater than 20M, a price to sales of 1.5 and relative strength over 52 weeks ranked in the top 20. This portfolio is re-balanced each month to give returns in the region of 30% PA (check these facts, this is all from memory). Many other filters use 13 week and 26 relative strengths - but none look only at 1 month - though that's not to say this doesn;'t have merit.

I trade on similar lines, with both UK and US stock. I don't trade the short side as backtesting this increased the volatility of returns and didn't offer the protection you might expect in the event of a 9/11 type situation.

Maybe better hedge your portfolio outright and except a market average"8%" reduction against your 30%, and maybe apply leverage?

Cheers,
UTB
Click to expand...

thank you blades for your contribution

will have a look at the site.

btw I was looking to hedge my long trading stock against a market crash and I might have
found a very good answer.
It wont cost 8%.
I`m thinking about placing an order say 200 points away from the present price of the DOW
with a CFD provider.
So DOW is now 12,500 - place a short sell order at 12,300 and change this order every day
to keep it 200 points away from the close.
You would only have to deposit 1% of the value of your order and even this deposit could earn interest if you choose a CFD provider wisely.
You pay ofcourse an opportunity cost.

Your portfolio is $ 500,000 - value stop sell order $ 500,000 - deposit $ 5,000 - opportunity
cost 30% (return portfolio per year) - 3% (interest earned on deposit) = 27% of $ 5,000 = $ 1,350
In a percentage of your portfolio this is only 0.27%.

If somebody has a day job and is actually too busy to trade and has some $ 50,000 laying around, that person could be sure to be a millionair one day if he/she puts in a stop sell order
of $ 5,000,000 with this deposit.
One day the crash comes, the Dow is down 35% after a few weeks and this person pockets
35% of $ 5,000,000 minus $ 10,000 brokerage minus interest for a couple of weeks @
$ 12,500 = $ 1,727,500.
You just got to be patient!

what do you think blades?
 
vetten said:
thank you blades for your contribution

will have a look at the site.

btw I was looking to hedge my long trading stock against a market crash and I might have
found a very good answer.
It wont cost 8%.
I`m thinking about placing an order say 200 points away from the present price of the DOW
with a CFD provider.
So DOW is now 12,500 - place a short sell order at 12,300 and change this order every day
to keep it 200 points away from the close.
You would only have to deposit 1% of the value of your order and even this deposit could earn interest if you choose a CFD provider wisely.
You pay ofcourse an opportunity cost.

Your portfolio is $ 500,000 - value stop sell order $ 500,000 - deposit $ 5,000 - opportunity
cost 30% (return portfolio per year) - 3% (interest earned on deposit) = 27% of $ 5,000 = $ 1,350
In a percentage of your portfolio this is only 0.27%.

If somebody has a day job and is actually too busy to trade and has some $ 50,000 laying around, that person could be sure to be a millionair one day if he/she puts in a stop sell order
of $ 5,000,000 with this deposit.
One day the crash comes, the Dow is down 35% after a few weeks and this person pockets
35% of $ 5,000,000 minus $ 10,000 brokerage minus interest for a couple of weeks @
$ 12,500 = $ 1,727,500.
You just got to be patient!

what do you think blades?
Click to expand...

Vetten,

I'd just be careful that your strategy didn't mean that you felt the pain of your 200 point stop, only to see your hedge kick in just as the market bounces. I suspect this type of thing might have happened last May and this February, but it's worth a look. Certainly the best % gains I've seen have been straight after a "crash".

Also note that a Dow or other index hedge probably won't fully hedge a portfolio based on momentum. Though it's said that correlation between stocks rises significantly in crash situations, those with the highest recent relative strength are battered most in my experience - probably the phsycological effect of not wanting to see good recent gains wiped out leads to early selling?

Good luck,
UTB
 
Sources for this strategy

Hi Blades and Vetten,

this maybe of topic and I am as well working on my strategy and planning on exclusively trading the "Top 20" strategy with CFDs. Lets see if that works. However since I am still in the research phase, I had a good look at aaii.com. Great site, however just for US stocks, but would you happen to know of any other high quality sites like this for UK and Japanese stocks (doesnt have to be free)

Thanks for the help,

Cosmoglobe
 
cosmoglobe said:
Hi Blades and Vetten,

this maybe of topic and I am as well working on my strategy and planning on exclusively trading the "Top 20" strategy with CFDs. Lets see if that works. However since I am still in the research phase, I had a good look at aaii.com. Great site, however just for US stocks, but would you happen to know of any other high quality sites like this for UK and Japanese stocks (doesnt have to be free)

Thanks for the help,

Cosmoglobe
Click to expand...

Hello Cosmo,

If you look at Marketstars at digitallook.com you can subscribe to that servive and backtest your strategies on UK stocks. It costs around £120 per year but you can sign up per quarter (£50 approx).

This is mainly a fundamental test / screener, though basic moving averages and relative strengths can be used. Backtesting goes back about 7 years.

Is this the type of thing you mean?

Cheers,
UTB
 
Last edited:
Thanks alot blade, very nice site.
However I combine the Top 20 strategy with momentum trading, where I will take the spread of the last 1-3 days and add/substract it to the opening price. That helps my decision whether opening a position. I do all this by hand. Would you happen to know what software is out there what could do that for me and generate a signal according to the past spreads?

I would very much appreciate if you could help me out,

Thanks
Cosmoglobe
 
cosmoglobe said:
Thanks alot blade, very nice site.
However I combine the Top 20 strategy with momentum trading, where I will take the spread of the last 1-3 days and add/substract it to the opening price. That helps my decision whether opening a position. I do all this by hand. Would you happen to know what software is out there what could do that for me and generate a signal according to the past spreads?

I would very much appreciate if you could help me out,

Thanks
Cosmoglobe
Click to expand...

Hi cosmo, You could try http://www.prorealtime.com/en/ it has a technical screener, which you could write up your own search, from what you have described above it looks possible on this platform, free to use for daily timeframes and above, costly for intraday. also has backtesting function.

Forgive me for butting in there the blades.

cheers

don
 
Hi Don,
Thanks,
http://www.prorealtime.com/en/
looks pretty good however End of Day market data for this strategy would not really help, and real time data would cost just for LSE 359 € just for 6 month. But I guess its worth the money.
Any ther cool software packages out there?

And I am sure Blade does not mind !!!

Appreciate it very much,

Cosmoglobe : :)
 
What you described above. You said you buy the Top 10 and look at the top 20. I just look at the top 20 of the previous days.... Gainers or losers, and then only trading with the trend. Easy as that.... and I combine this with other strategies. So basically I made it up, but to bring it to a point, I have a look at the top 20 and combine them with a second strategy eg momemtum trading. This strategy gives less signals but more reliable ones

Hope that helps,
and if anyone would know alternatives for prorealtime.com, then I would be glad hearing about them.

Cosmoglobe
 
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