# Reverse Scale System



## GPO (26 November 2015)

Hi All,

To begin with, I am a total newbie in stock trading (embryo, in fact), and this is my first post here, so apologies in advance for inappropriateness etc.

I am contemplating over Reverse Scale Strategy (from Five Minute Investing by Braden Glett) for long term trading. It appears to be based on the assumption that, of all stocks on a 52 week high list, there will be enough stocks which will go up in price at least 2.25 times after purchase (which gives 16% profit) or 3.38 times to cancel out all those that would be sold at loss if it fails to increase at least 2.25 times and declines to the previous decision point.

What would be the easiest way to test that assumption? That is: how to find how many stocks that were at 52 week high on say 25/11/2014 have increased at least 2.25 times without declining more than by 33% at any time? Where/how would you look for this data?

Thanks!


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## So_Cynical (26 November 2015)

GPO said:


> I am contemplating over Reverse Scale Strategy (from Five Minute Investing by Braden Glett) for long term trading. It appears to be based on the assumption that, of all stocks on a 52 week high list, there will be enough stocks which will go up in price at least 2.25 times after purchase (which gives 16% profit) or 3.38 times to cancel out all those that would be sold at loss if it fails to increase at least 2.25 times and declines to the previous decision point.




If you looked at some previous months you would find that sometimes there would be lucky to be 15 or 30 stocks in the all ords hitting new 52 week highs, other months when all boats are rising there would be many more.


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## GPO (26 November 2015)

So_Cynical said:


> If you looked at some previous months you would find that sometimes there would be lucky to be 15 or 30 stocks in the all ords hitting new 52 week highs, other months when all boats are rising there would be many more.





Well, those 30 or so would be just a sample set. The question is - if I bought them all, how many of them would: drop by 33%, increase 1.5x, increase 2.25x, increase 3.38x or more? Historical data must be out there, I just can't figure out an easy way to get it


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## Gringotts Bank (26 November 2015)

GPO said:


> Hi All,
> 
> To begin with, I am a total newbie in stock trading (embryo, in fact), and this is my first post here, so apologies in advance for inappropriateness etc.
> 
> ...




If you can be more explicit about the rules, I can test using Amibroker.

You want to buy all stocks which have crossed their 52 week high, at close.  Yes?
And sell at a profit target of 2.25x entry price.   Yes?
When does he sell the losers?  How does he know when to sell the losers?  Is there time limit?  Or a stop loss amount?
Presumably some $turnover filter would need to be applied in order to find appropriately liquid stocks.


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## GPO (26 November 2015)

Gringotts Bank said:


> If you can be more explicit about the rules, I can test using Amibroker.
> 
> You want to buy all stocks which have crossed their 52 week high, at close.  Yes?
> And sell at a profit target of 2.25x entry price.   Yes?
> ...




Thanks Gringotts Bank!

The rule is:
- take all 52 wk highs at a certain date with share price over $15/share (optional: filter off precious metals, oil, utilities, food/grocery)
- buy them all at $1000 each
- set decision points for each at: 0.67x purchase price, 1.5x pp, 2.25x pp, 3.375x pp, 5.0625x pp
- if a share goes up to the decision point not previously achieved, invest another $1000.
-if a share goes down to the previous decision point, sell all

No time limit

If this is something you could feed in Amibroker, it would be great!


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## Gringotts Bank (26 November 2015)

GPO said:


> Thanks Gringotts Bank!
> 
> The rule is:
> - take all 52 wk highs at a certain date with share price over $15/share (optional: filter off precious metals, oil, utilities, food/grocery)
> ...






ok, I get it.  It requires a scaling into positions which is something I can't do easily (Amibroker can do it, but I can't!).  Maybe ask on the Amibroker thread.  Someone there will be able to code that for you and show you a backtest.

I'm assuming the author is American.  For ASX, I'd filter with stocks >$3 and turnover >$500000/day.


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