# October Stock Tipping Comp Tech's short term trading portfolio/test case



## tech/a (1 October 2005)

I've noticed that there are some real performers picked by those here.
Thought that this would be as good as any to pick short term trades.

As funds wouldnt allow trading all of these at once I have chosen those which I believe have the best potential to out perform (No offence to anyone I certaintly wont be 100% right and will be interesting to see if a chart scan will gleen more winners than the main comp).
I have allocated $5000 to each trade with stops mainly at 10% of purchase price---some of the low priced volitile stocks are at more.The comp doesnt have this facility.
I will also use a variable 3 day EMA technical exit---a close below means an exit.
See chart attached.

As part of the short term trading system thread thought this could have a chance of success.First thing is attempt to out perform the whole comp.

I can show progress each day after downloads each night.
Thought it would be interesting.
Would need $60000 to trade.
See attached portfolio.
Portfolio software is Stator.


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## emma (1 October 2005)

You've been reading my watch lists!!!!!!!!!!


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## tech/a (1 October 2005)

*Meant to mention the stocks are from the October Tipping Comp the only one of mine is WEB which is my selection in the comp.All the other tips are from those in the comp.*


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## doctorj (1 October 2005)

Will be an interesting thread and I intend to follow it closely. 

How did you vet the list of tips?


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## tech/a (2 October 2005)

Doc.

It was simply eyeballing the charts.
PMA above is an example.I was looking for clear indication that the stock was on the move.My thinking is that being short term trading I want there to be action immediately.
There is certaintly risk with trading short term.O ne area I will be investigating is the effect of INITIAL STOP placement.I've purposely set wider than usual stops as I've not analysed the total performance.
I'm of the opinion that a 10% from initial buy price stop is OK for stocks over 50c but 20% would be required for stoks below.
This is one question I wish to answer.
Over time I'm hoping we will be able to tweek trading rules to improve performance.
I also intend to continue running each months portfolio beyond the end of the month to determine.
(1) Whether closing the portfolio at the end of the month regardless of Stock performance
OR
(2) Continuing the portfolio until ALL trades have either been stopped or exited at which then that months portfolio is extinct---If this proves the best thing to do in real life finding $60k a month or so would be a challenge!!!
OR
(3) A combination of (1) and (2) where stocks that go cold are closed by the introduction of a trailing stop---even though the exit chosen for the method is pretty tight.

Anyway all questions I would like answered and though it would be interesting to publish the search.the results and any discussion.

Are there any questions that others would like to discover in this exercise?


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## canny (2 October 2005)

Tech/a - I'm happy to see my tip made it into your test portfolio (WME)
They are a very bright little number who have been trending nicely lately. The volume is too low for my usual liking, but I believe there is good to come out of them after making a placement that happened about 6 weeks ago and finding none of the new stock flooded back to market. Tightly held and awaiting news.  
Love your portfolio-
I think it's a brilliant idea, and suggested we monitor it a few months ago to see the overall result of taking up the tips, but didn't make the effort myself - so thanks tech and I too will be watching with great interest.
Also for fun it would be good to see how 'the rest of the field' performs - which is roughly the same number of stocks again - or maybe a slightly larger field actually as we had a few last minute entries.


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## tech/a (3 October 2005)

Ive further weeded out the "A" list in my veiw so if funds didnt allow $50,000
These are the must have.I'll set them as well as those not making the Cut in a portfolio so performance can be guaged at a glance.

"A" LIST

WEB (I'm biased but think this will be at the bottom of the others).
BLR
TOX (Biased here to)
PNN (Dark horse).
PDN
GGY (This I really like)

Liquidity was a large factor in determination as was chart performance.


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## krisbarry (3 October 2005)

tech/a said:
			
		

> GGY (This I really like)
> 
> .




The market seems to dislike GGY today


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## tech/a (3 October 2005)

*Yes it maybe that Myself and Epsilon are the only 2 on the planet that do like it.*

I get it wrong more often than get it right.
The bottomline--Reward to risk--is whats important not individual performances.
GGY is currently over stretched after Fridays surge.
An inside day would be expected here the higher it finishes towards Fridays close the stronger the buying was Friday.Under 7.5c would be below average.


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## krisbarry (3 October 2005)

WEB, another good company, with record profits although the Bali Bombings will effect the share price this month.


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## mikeg (3 October 2005)

Hi Tech,

Will be interested in the outcome of this exercise. 
Also, I have a couple of questions.

You said that this is for short term trading, what do you class as short term?
To me, short term means that as long as the share is trending strongly, and has not broken my stop, then I am still in, be it 1, 3, or even 6 months.

You also said that you would be using a 3 day EMA as your stop. What is your reason for such a tight stop. In a strong trending share, I would have thought a 9, or even a 12 day EMA would be more beneficial. As we all know, when a share is tending strongly it will nearly always have a 2-3 day pullback, breaking the 3 day EMA, before taking off strongly again.


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## brerwallabi (3 October 2005)

mikeg said:
			
		

> Hi Tech,
> 
> 
> You said that this is for short term trading, what do you class as short term?




To some people anything under 6 - 12 months might be deemed short term even 2 years to others. I have made many trades some being for periods of hours only, others have gone 3 to 4 days. Not sure what Tech is actually out to do here but he called a short term trading system, be really interesting to see how that 3 day ema goes across these stocks, but will he go back for more if he exits and take profit at various stages in an uptrending stock, only Tech can answer that, certainly I do.


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## tech/a (3 October 2005)

Mikeg

As the comp runs only for a month then I guess thats the length I'm talking.
Having said that though I certaintly agree with you and have already mentioned that I'll probably run each month until it comes to its natural end.

EXIT.

Its not a 3 day EMA its a Variable 3 Day EMA which is a custom formula that I'm playing with.
It works completely different to an M/A cross over as the trigger is a binary code which detects down turns from the constant variable and expresses it as either true (1) or False (0).
The idea of the Variable M/A is to follow the trend and Ive shown on this chart the difference in the way the 2 Indicators plot and the signal of each.

The Selections today almost paid for total brokerage for the 12 trades both in and out.
I'm doing this for fun and by no means offering up a short term system.
I personally feel I can get it to turn a good profit but thought I'd post things as they develope here.
Others may wish to use other selections other stops and other exits.
*This is just one.*


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## tech/a (3 October 2005)

The short "A" list is actually nett profitable including paying for broker fees.


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## Julia (3 October 2005)

tech/a said:
			
		

> *Yes it maybe that Myself and Epsilon are the only 2 on the planet that do like it.*
> 
> I get it wrong more often than get it right.
> The bottomline--Reward to risk--is whats important not individual performances.
> ...




Tech/a

"I get it wrong more often than get it right" (above)

Can you clarify this statement?  Does it refer to just this thread, or does it refer to your overall trading of your portfolio?

Not looking for exact results here, of course, but just the general idea.

I guess what I'm really interested in - and perhaps this should be a new thread - is how often technical devotees succeed, compared with those of us who at least thus far, rely on the fundamental approach?

Could we take, e.g. a base of 20 stocks (or perhaps not everyone has that many intheir portfolio?) and comment on how many after,say, six months, are worth more than you paid (include by how much if you like), and how many are about the same and how many have shown a loss of 10% or more.

I'm not suggesting this exercise in order to know anything about what stocks or what value anyone has.  It's just that I'm currently in that question mark area of wondering whether TA or FA produces the best results, or more likely, is it a combination of both?

Someone may be able to suggest a more logical way to approach what I'm thinking about.  Above is just a sketchy idea only.

Would really appreciate your thoughts.

Julia


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## brerwallabi (3 October 2005)

tech/a said:
			
		

> Mikeg
> 
> Its not a 3 day EMA its a Variable 3 Day EMA which is a custom formula that I'm playing with.



Care to share the formula with us all if it works?


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## tech/a (4 October 2005)

Brer

No problems I'm happy to put it here now if there are others who wish to tweek it--perhaps we can devise a new indicator.--I've also done it with ATR.

Julia.
I learnt around 6 yrs ago that the vast majority of people involved in Business (The right product,the cheapest price,etc),Property (Position,timing),and particularly Trading are of the opinion that each and every decision needs to be right when in fact there is only one thing you must guarentee and thats that your dealings are profitable..
Lets take trading.
Most get hitched up on the analysis---the all important selection of a trade.
We have Fundamental,technical and a combination of both.
I think youre aware that I've been involved in the development and implementation of trading systems for many years. From that research I can tell you that youll be more correct in the short term than the long, although you tend to become more correct again over the very long term.

Short term traders--very good ones will get it right around 45-60% of the time.
Their profit / trade will be as low as 1.2:1 but would ideally aim at 2.5-3:1.
Longer term Traders will get it right (Over their timeframe)30-40% of the time but will return a reward to risk of over 5:1 I myself systems trade at 12:1.
My systems trading % winners is around 45-50%,testing told me it would be around 32%but I do Eyeball charts which wasnt built into the systems testing.

I have been discretionary trading a bit of late and I seem to be at around 40-50% with these with a R/R ratio of around 2.8:1

*ITS ABOUT THE NUMBERS*

Once you understand that then you can work on MAXIMISING those numbers.
(By you I mean anyone trading/investing in shares).

Thats what this exercise is all about---we have noticed some good results in past months and this exercise is an attempt to maximise those numbers and see if they are worth trading.To trade them on selection alone would not be very profitable---hence the introduction of other factors which WHEN APPLIED--will result in a set of numbers--its not the factors alone---but the combination which will result in various ratios of win/loss and return---these should be the Traders/investors tools of trade--how you get YOUR numbers (The tools you use) wont in itself determine your success.

Julia in your own case its a matter of maximising your numbers---but thats a few weeks down the track--(In reference to our private mails).

I'm hoping that this all becomes clearer as the exercise matures.


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## Milk Man (4 October 2005)

Custom indicators are becoming a favorite of mine too! Great minds do think alike huh!   I probably just gleaned the concept off one of the great minds here at ASF anyways.

Im more than happy to have a stab at it. I dont know squat about this binary code business though. Sounds like a job for the all conquering Greatpig! After that automatic trendline thingy I reckon you can manage anything GP.


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## tech/a (4 October 2005)

PNN would be exited on stop at 54.5c This is a technical stop and below the 10% stop set as a fixed initial stop.
For this exercise it will now show on the 2 portfolio's running as sold---stopped out.

GGY is close to its exit of .067 being 20% of initial buy.
A lowr high and lower low have been made on the daily tick charts which is not a good shorterms sign.
However it is coming to rest in some old support areas (.07c ) and may hold.


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## tech/a (4 October 2005)

I actually sold my WEB holding today.
Bali has caused a short term sell off in my view with a possibility of better buying this month.
Stop for these portfolio's is 42c so I'll leave that in place.


*QUESTION*
If I was trading this as my porfolio I would be looking at my universe of stocks to buy new prospects if one was stopped or exited.
I'm thinking that if this is to be a reflection of a true traded portfolio in which we trade those stocks selected in the comp (our stock selection universe),then each time the opportunity arises I should take another trade---either pyramiding one already open----or a new selection---or buy back into a trade previously closed.
After all this is a test case in attempting to maximising the return on the competition selections.

Your thoughts?


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## dutchie (4 October 2005)

That would probably be more realistic and more usable if the system was found to be profitable. How would you decide which stock to replace the one that has been stopped out? 

It would also be interesting to see how the system performed by just buying them at the start and selling them at the end.

But if past performances are anything to go by if the any of the top finishers are initially selected then the system(s) will be profitable.

In regard to the starting price of the shares on the first day being different to the close on the previous day maybe it could be assumed that the shares are purchased at the closing price.


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## doctorj (4 October 2005)

I think you should include re-entry in the tests.  It should be again limited to the universe of stocks in the competition.  I like the idea of pyramiding one of the successful trades already opened, the only downside is that a larger position will require tighter stops for risk management which may not be appropriate for the volitility of the universe we'd be trading.


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## tech/a (4 October 2005)

Dutch

I would use the same criteria I used to initially filter---eyeballing the chart for OBVIOUS signs of forward movement.It maybe that some not selected show this a bit later down the track.
I may not find one!
I will be giving the results as you suggested if simply held as well.
After all if we cant out perform that then future buying will be a bit pointless.

Doc
If pyramiding I like to take the pyramid trade as a trade on its own with its own stop.
The exit remains common to both/all buys.
So the Pyramided trade could be stopped out while the original continues on.
I will say that Pyramiding is more successful the longer term you go.
You also need not pyramid a full parcel either.
For short term I would suggest partial pyramiding.50% or 33% increase in position size.


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## tech/a (4 October 2005)

Web has also now hit its 10% stop loss so will note that it would have been stopped out today at 42.5c.
I'll leave it in the system so as to record firstly how the method would go purely buy and hold.
When I have time I'll set up another which will be added and subtracted from.


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## tech/a (6 October 2005)

*President Bush* has been following our Portfolio.
This is how he has reacted to this months results so far!!


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## canny (6 October 2005)

Tech - is there somewhere we can view your results?


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## tech/a (6 October 2005)

Ill post them tonight.


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## tech/a (6 October 2005)

Boy this is ugly!!

There will be a lot to learn from this and I'm glad that its is all recorded.
These tables--DO NOT--include those stopped out or any re buys.They wont until the end.I'll just record all as buy and hold and as they get stopped or others are bought place them on this thread so the results can be updated at the end and compared.

Table (1) Is 12 best picks as of yesterday
Table (2) Is "A" List as of yesterday
Table (3) Is 12 best picks as of today
Table (4) Is "A" List as of today.
Table (5) Is The comp as of today.(For comparison later)


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## dutchie (6 October 2005)

Tech

Funny how most of the time the comp. is normally half in green by now.

Then when you go to test it for profitability, you get a start where nearly everything is red! (one of Murphy's laws no doubt).

(A few more red days and everything will be stopped out)

Anyway a good test, if this month ends up profitable then  "normal" type months will be rolling in it.


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## tech/a (6 October 2005)

After a 200 pt drop in 2 days,And only a 12% total drawdown on a portfolio of basically small caps,only a few days into the comp,I reckon its doing well.

If all get stopped out then all get stopped out.
But there are even now things becoming apparent---which are yet to be confirmed--like stop distance.Those in profit could well be in loss--youll note they have only moved a tick or so up.

It wont take much to turn this around.
As time goes by stops may well play an important part in the final wash up.
I wouldnt be to concerned with a loss in a month either.

This is what reasearch testing, particularly live, is all about.
You cant cheat.
You cant kid yourself.
You can analyse the results and implement or retract ideas as the method is refined and an expectancy can eventually be calculated.

It is difficult to design a profitable discretionary/systematic methodology but that is the only way I believe a short term share trading method can be designed---and it will take time. Could well be worth it---a lot will be learnt.

*I encourage anyone who sees something of note to bring it up for discussion.*


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## tech/a (7 October 2005)

OK.

What we are trying to achieve is the best result from the portfolio.
So as part of an alternative to buy and hold we can implement stops and re buy stratagies.As I dont have the time to set up another portfolio I'll just record what would be done here and do the tabulation later when I have time---then we will be able to see if there was/is an improvement on the buy and hold.

Normally I would place a 10% of purchase price stop.So on a $1 share that would be 90c
That would mean that 
GGY stopped at .075c
GOP stopped at .18c
PDN stopped at 2.21
PNN stopped at .55
WEB stopped at .42

Now as we are stuck with this portfolio then we will be looking at opportunities to buy back if they appear.
GGY is one that I actually bought yesterday at .067
I would be looking to re enter the test on GGY if it has a positive day 
IE can maintain above yesterdays close.
All new stops would be 10% of purchase.

I'm thinking that short term and small parcels of $5k may thwart the stop methodology as brokerage may kill it.Anyway time will tell and this is one question that can be answered in this difficult period.

WEB I see as a buy above yesterdays close.
PNN at .48 above yesterdays high will be seen as a reversal,its at 61.8% retracement now.
PDN double bottom at 2.14 would have to hold and trade above yesterdays high.
GOP Looks horrible would need to fill the gap strongly and may not be a contender in future I would wait a while on this b4 considering again.

I will start a seperate portfolio record with this in it when I have time.
The tables currently being recorded will remain buy and hold only for comparison.


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## Knobby22 (7 October 2005)

I just want to point out why I picked Qantas which many at the time probably thought had no hope. e.g. it didn't make the Tech/a list.

My guess was that there would be a correction this month and that the oil price would drop.

Qantas should gain from the oil price drop and having a high yield and low PE shouldn't fall, especially compared to the trading style stocks put in by others. 

Unfortunately, so far it hasn't quite worked out as it has fallen a bit with the overall market but hopefully the lower oil price should start some bargain hunting soon and it may go my way yet.


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## tech/a (7 October 2005)

Knobby.

The last thing I want to do is have people judge others selections based upon my own methodology.
I get it wrong as often as anyone else.
The idea of the exercise is to develope a methodology that may be a profitable way to trade these selections.
I'm hoping people will add to the discussion with their own ideas which they can present as alternatives,additions or Hypothosis.I dont have time to run every idea.

Just because peoples selections dont make my list doesnt place the kiss of death on the selection--probably quite the opposite.

The other thing to remember is timeframe---selections like yours and I'm sure others may well take a while to materialise,and if they do in the month of the comp then you'll be right up there if not then it may occure in the next month or so.
Another reason why I'll continue the portfolio study of October until Janurary and Novembers till Feburary.

Because its so short term as well I'm influenced by my idea of selecting best "Bang for Buck" trades.


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## Knobby22 (7 October 2005)

Tech/a, I didn't mean to infer in any way I was having a go, maybe my wording could have been better. 

I knew that my choice would not meet a traders methodology. 

I am also confident that many would have thought I was crazy picking a stock like Qantas which doesn't move much at the start of this month.

I just wanted to explain a different viewpoint, out of the square if you like.


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## tech/a (8 October 2005)

End of Week 1
Even a bit of a pullback even though the market was negative--6 rose in price of the 12 only 3 continued to drop --- 3 Flat.
"A" list faired even better.


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## tech/a (15 October 2005)

The list of 12 is still decreasing and the "A" list is creeping back.
The "A" list doing now the better.

To answer a question I've had raised by email I have included the sale at stop loss of 10% of purchase price on the day the stock CLOSED below this price at the CLOSE---so there is some slippage.
This list the Aussi A list Exit list is performing at the lowest loss.with 2 open trades still live.and a nett loss of about $842.

Note while BLR traded below its stop it never closed below it so is still live.


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## tech/a (15 October 2005)

For interest the total portfolio at $5k a trade statistics are.

Initial portfolio value $145,000
Current value $ 133,680
-7.81%

Average loss 11.85%

Average Gain 11.60%

% profitable 17%
% losers 83%


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## tech/a (4 December 2005)

Hasnt been a great deal of interest in this exercise.

However I have kept it going on "stator" portfolio software just to see what would happen a little down the track.

Many would remember that this was a disasterous competition month with only 3 traders I think being profitable out of the 20 odd.

I made up 3 portfolios out of the Comp selections.
(1) My selection of the 12 stocks I felt would perform the best of the comp.
(2) The best of those 12 in my veiw--- there were 5
(3) A portfolio of the 5 where a loss of 10% would be an exit.

These are just 3 possible ways of trading the list but the idea was to see if we could gain a better result than just buy and hold for a Month.
Now the "Improvements" were simply a condensing of the portfolio and taking a stop.

If you remember the result at the end of the month was a total portfolio loss of double figures.
While not a definative result in that this small test is conclusive the results I'm sure will be of interest to some.

I dont have the results of the whole portfolio.(Damn)

*(1) Is now still -12.22%
(2) Is better with a loss of -8.3%
(3) Is in PROFIT by 5%*

All % statistics are based upon INITIAL Capital expended on all trades IE $5000 each trade.

This was simply a selection of stocks from those trading here.
My point is that small alterations in the way you trade can have huge impacts on the result.Selection of stocks being the least important in my view.

If anyone wants the portfolio tables captured and placed on the forum let me know.


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## Happy (4 December 2005)

Tech/a,
October was probably tough month (usually is anyway).

Any chance to have a look at November and if too late, would it be possible to try again in December?


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## RichKid (4 December 2005)

Interesting to see what would occur if you had all trades taken with a stop at 10% and position size set according to volatility (or three arbitrary dollar amounts set by stock price eg $2k, $4k, $6k). That way little discretion but the effects of the stop would be clear. Maybe pyramid $1k on move of 10% from entry.... and then $1k once 20% from entry with the stop set at 10% max for toal position...just thoughts it's probably too hard to do....trying to cut losses and compound profits, that's all. We only need one or two big winners, we seem to have that in this comp in good months.


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## canny (5 December 2005)

Richkid - I'm intrigued by the $2, 4 & 6K scenario.
I thought techs original 5k was a good figure.
Do serious traders ever really put just $2K on a stock?
In my opinion, they have to go too far to make anything - and by the time you've paid brokerage (say $60 for buy and sell) it's just a futile exercise.
I guess if they are investments for 12 months or more, it may be worthwhile, but I haven't looked at those figures since my first month in.
What do others think?
What's a good trading figure?  
Personally I usually enter with between 5 & 10k depending on risk factor - and then build up if successful.


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## tech/a (6 March 2006)

Remember this back in October.

Was an all time bad month.
I was attempting to demonstrate the efficiency of culling a Universe of stocks such as those chosen by the members here.

I compiled 3 portfolios.

(1) The best as I saw them technically of those selected by all
(2) The 5 best as I saw them technically of (1).
(3) As (2) but exiting those that made a 10% loss as a Stop

So how are they going now?

Maybe something here for those in the ASX competition.
My advice to them would be dont trade a portfolio if you expect a good result.
Clearly this small exercise is showing a 100% better return on selection of those clearly showing a bullish tendancy technically (That was my initial technical filter for culling the 5 "Best")
And a 700% better result setting a stop on the 5.

I dont know how the original selections went as a complete portfolio but would be interesting if someone has time.


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