A simple strategy

[dazzam]

Has anybody ever looked at a strategy of the following:

By simply looking at major movers on the day and then placing a long or a short depending on what the major move is, i.e. riser place a long, down place a short the same day. Obviously this does not catch the up or down move but statistically the price would usually follow the same direction the next day. Obviously not always the case but I have done some checks over the last few days and the percentages are 70% in favour 30% against. So if you utilise sensible Stop Loss then this may be a good stratergy albeit mind numbingly simple.

I would be interested if anybody has used this and can shoot me down in flames if it hasn't worked for them.

Just sometimes the simplest statergies are often the best.

Obviously there are issues of spreads charged etc but if you select your stocks cleverlyl i.e. avoid some of the larger stocks.

I would also look at utilising some TA i.e. Trends and support and resistance levels.

Anyway I am ready for being shot down.

 

[darrren]

The problem, if you are Spread Betting, is that if you set a stop to get out with a small loss you can easily get stopped out just by the normal price fluctuation of the next day. So, while the EOD price may have ended up in the correct direction as per your system, you may get stopped out earlier in the day.

This is one of the enduring dilemmas of short term trading, particularly SB, where losses can arise very quickly. If anyone has a view on minimising this I , for one, would appreciate the advice.

 

[kevinmcm]

You are not too far off the mark. I noticed this a while ago and only recently worked on some predictions based on a similar system. I also noticed that there is a strong correaltion to R1/S1 levels. Based on this I worked out a way to 'predict' stocks in FTSE 100 that would either hit the R1 or S1 levels.

Only been trying it for a few weeks but have put the results here. Opening gaps play a big part and as the list is made up based on closing data some figs are out. I have modified the lists for 2nd & 3rd October to take into account opening gaps as an excercise.

Week 1 :
http://www.tradersoftware.biz/testdata/22092003.html
http://www.tradersoftware.biz/testdata/23092003.html
http://www.tradersoftware.biz/testdata/24092003.html
http://www.tradersoftware.biz/testdata/25092003.html
http://www.tradersoftware.biz/testdata/26092003.html

Week 2 :
http://www.tradersoftware.biz/testdata/29092003.html
http://www.tradersoftware.biz/testdata/30092003.html
http://www.tradersoftware.biz/testdata/01102003.html
http://www.tradersoftware.biz/testdata/02102003.html
http://www.tradersoftware.biz/testdata/03102003.html

Kevin.

 

[Grey1]

Dazzam ,

you are right ,, The simplest strategies are often the best because every one else is using it too .. Your observation is actually a profit making strategy,, In techncal analysis we feel the break out from consolidation are OFTEN in the direction of the previous trend.. .. I have a feeling many swing traders be making a fortune out of this strategy now that US recovery is ahead..

You can attach a simple Money managment system to your finding and you got yourself a good and proven money making system.

 

[tomorton]

Hi Dazzam
My own survey of price behaviour following release of results suggests that a rise on the publication day is followed 2 times out of 3 by a further rise on the next day. As these are often the best risers of the day, it seems to back up your obs.

The strategy of buying the biggest risers for another rise tomorrow was put forward by Malcolm Stacey in either Armchair Tycoon or Poolside Tycoon, 2 of the less serious books on the markets. He suggested buying the riser from the top of the BBC Ceefax gainers list.

 

[dazzam]

thanks at least I am not going too mad with this strategy. Kevinmcm, I will have a clook at your data and see what it looks like. I am going to do some work over the next couple of weeks to see if I can also come up with something. to auto predict see what happens. Thanks again for all your help.

 

[kevinmcm]

Todays results http://www.tradersoftware.biz/testdata/06102003.html

 

[Newtron Bomb]

very interesting..

I read a book, quite some time ago, with a similar theme which sparked a few ideas about buying and selling the bbc winners/loosers list. It did produce some interesting results and i was able to produce simple profitable strategy from it... on paper at least lol as i never followed through and moved on when i had satisfied my curiosity

 

[Newtron Bomb]

...And her it is click here

 

[kevinmcm]

Havent been posting the data as I have been busy. Yesterdays results & todays picks are here.

http://www.tradersoftware.biz/testdata/16102003.html

http://www.tradersoftware.biz/testdata/17102003.html

Ignore the signal - its a good indicator but the idea is to give a range to trade so it doesnt matter if the high or low is taken out first.

Kevin.

 

[dazzam]

Cheers Kev. I am picking through the data as we speak and I am going to paper trade probably for about a month and see how it goes. Looks promising though. Thanks again for your help with this.

 

[fudgestain]

Well if buying the apparent uptrend or selling the apparent downtrend was that simple it would be making millions for all individual traders everywhere, wouldn't it? It isn't.

Assume it is the price going up. When is it an uptrend? For 20 minutes, 1 day, a week? Which one do you want to play anyhow? Can you even identify this uptrend? All the usual stuff is still going to apply, right? Will you be buying at the top or at point where it doesn't run for enough points? Will you run the position if the price is now going down? If so why didn't you sell in the first place?

Is this really much of an advance, if any, over random entry?

 

[kevinmcm]

fudgestain - who are you replying to ?

If its me you have mis-intepreted my posts. My stock picks have nothing to do with buying an apparent up/down trend. These stock picks work very well in a market moving one way or another, they are not tied into a trend. You could be shorting an upper range in a uptrend.

I'm merely pointing out that a certain group of stocks stick very closely to a set range based on previous days H/L/C values.

From yesterdays 20 stocks - 15 of which exceeded and came back with the range high/low or were very close to a range limit. I wouldnt call 75% success on any system a random result, especially if it is repeatable. I havent analysed all the data but as a rough guide I would say better than 70% of the stock picks are usable.

ABF, CBRY, CW, DGE, DXNS. EXL, GUS, HSBA, ICI, NGT, NRK, RIO, RTR, SPW, UU

Well its not an advance from the point of view that the data is freely available, its how you use it that counts.

Random entry is for mugs, burn your cash it will be quicker. Entering any trade without a plan is for fools.

I'm willing to listen and learn though. Why not pick 10 stocks per day and post a random sell & buy level and see how it works out.

Kevin.

 

[darrren]

Newtron

The link you gave to your strategy goes to a thread on producing charts and there are no posts from you. Am I misunderstanding?

 

[damianoakley]

"random entry is for mugs......."

Random entry isn't necessarily for mugs.

Mugs are people who focus too much on entry techniques and don't understand the importance of exits and position sizing.

With correct position sizing and a sound exit strategy, I think your technique of looking for big movers and following them would be very profitable over the medium to long-term. Successful momentum traders base their trading on this very concept.

The simple strategies are the best.

 

[Newtron Bomb]

Darren
sorry for the confusion ive just reread the thread and it appears the link i posted was meant for a different thread...
Unfortunately i cant find where it was supposed to go, it was for someone to be able to create there own watch list of stock charts without the need to subscribe a web site or software.

As regards the strategy just let me know if anyone wants it... ill have to did it out though

NB

 

[kevinmcm]

Re: "random entry is for mugs......."

Random entry isn't necessarily for mugs.

Mugs are people who focus too much on entry techniques and don't understand the importance of exits and position sizing.

With correct position sizing and a sound exit strategy, I think your technique of looking for big movers and following them would be very profitable over the medium to long-term. Successful momentum traders base their trading on this very concept.

The simple strategies are the best.

Why would you plan a sound exit strategy and position sizing and miss out the very important entry point? Entry point is every bit as important as an exit strategy.

The data I posted is for day trading not medium to longtrem positions and has nothing to do with big movers.

Kevin.

 

[damianoakley]

Apologies, I've misunderstood your strategy.

I thought it was based on End-of-Day - didn't realise you were looking to daytrade it.

I was actually praising your concept though. And I agree that entry point is important. And I'm not suggesting that random entry is a good idea. But it has been proved that random entry is actually profitable with good exits and position sizing.

Personally, I'd rather have all three - good entry, good exits, and good money management.

 

[snip]

NB & Darren

If you are interested in using a free watchlist for US stocks then try Prophet.net: http://www.prophet.net

Cheers Snip

 

[fudgestain]

Kevinmcm, the proposition being put is by the threadstarter, Dazzam. One of the replies to that is mine, with which you can choose to agree or disagree.

Random entry .. don't support it; have never supported it. Period.

To repeat my question: is Dazzam's proposition really much of an advance, if any, over random entry?