BASIC trading strategy that can work?

[grah33]

Hi

i've been buying in the game several of the "top gains " stocks as reported by the asx site. i made some great wins in the game, but also saw some bad losses on other weeks. what do you think of this strategy:

diversify through buying eg. 6-10 of the "top gains stocks". (buy them as they are reported on the website or soon after)
eg. $2,000 each (might start at $500 first)

sell when they go up a good amount - eg.5%-30%
LEAVE bad stocks alone. let them go down. eventually after some time (could be 1-4 months) they'll go back up again.

focus on picking stocks that show prices cycled up/down in the last few months.don't get something that has a steady long term down trend. use volatile stocks for this.

what do you think? in the game i locked out some heavy losses, but if i look at the price charts of these stocks, quite a few come back to positive values or at least break back to zero. my strategy would be to diversify and sell off the good stocks and buy new ones to replace them and as for the bad stocks, to simply wait - could be a month or 2 before they roll over positive again. i'm thinking this might work.

and are there any other "no brainer " strategies that would help someone gain some money.obviously this isn't as good as professional day trading but i would be delighted to get something positive out of it. might be better than long term investing on blue chip stocks

thanks

 

[Julia]

sell when they go up a good amount - eg.5%-30%
LEAVE bad stocks alone. let them go down. eventually after some time (could be 1-4 months) they'll go back up again.

Possible translation: instead of letting your winners run, you're going to dump them while holding on to losers.
Why would you assume that something going down is necessarily going to go up again?

focus on picking stocks that show prices cycled up/down in the last few months.don't get something that has a steady long term down trend. use volatile stocks for this.

What would be your reason for buying anything that is in what you describe as a 'steady long term downtrend'?

my strategy would be to diversify and sell off the good stocks and buy new ones to replace them

What criteria would you use to determine that the 'new stocks' will be more profitable than those you have already described as 'good stocks' by which I imagine you mean profitable?

 

[hhse]

There is more than one way to make money other than just being long/bullish stock - you have the benefit of not being restricted like a super fund and shouldn't try to act like one.

 

[tech/a]

There is more than one way to make money other than just being long/bullish stock - you have the benefit of not being restricted like a super fund and shouldn't try to act like one.

Agree and preferable
But that's where most start.

 

[DJG]

i've been buying in the game several of the "top gains " stocks as reported by the asx site. i made some great wins in the game, but also saw some bad losses on other weeks. what do you think of this strategy:

what do you think? in the game i locked out some heavy losses, but if i look at the price charts of these stocks, quite a few come back to positive values or at least break back to zero. my strategy would be to diversify and sell off the good stocks and buy new ones to replace them and as for the bad stocks, to simply wait - could be a month or 2 before they roll over positive again. i'm thinking this might work.

You were using fake money, how would you feel if you were to lose 20-50% on a single holding? What about three holdings? etc. (of real money by the way)

diversify through buying eg. 6-10 of the "top gains stocks". (buy them as they are reported on the website or soon after)
eg. $2,000 each (might start at $500 first)

sell when they go up a good amount - eg.5%-30%
LEAVE bad stocks alone. let them go down. eventually after some time (could be 1-4 months) they'll go back up again.

Who's to say it'll continue it's march up the following days/weeks? Additionally, who's to say that it'll only take 1 - 4 months for them to reverse?

Oh, and brokerage will eat right into that $500.

If it was this easy, everyone would be using the same strategy and making 'no brainer' easy money.

 

[burglar]

... thanks

grah33, what makes share price go up?

 

[grah33]

grah33, what makes share price go up?

waht makes those stocks go up? top gains stocks reported on asx, maybe nothing in particular. i don't know. they are often just volatile

the point of my strategy is that many of those volatile stocks that go negative, if you wait some time (maybe 4 weeks), they tend to go the other way as well (i checked the price charts and saw this). I could wait as long as it takes for enough of them to turn round if necessary perhaps this no brainer strategy could at least give me a little money on the side.



the other strategy i'm also trying now (in the game of course) is to buy say 6 stocks, same value for each, of the top gains stocks . if a stock goes down 3.5% , i sell it off and buy another. if i get a good stock, i wait until it makes 7.5% or so, then take the profit. each time a stock goes out, i replace with another one. wonder how that will go. with a low 9$ brokerage could be alright... but i'm just testing stuff out in the game, even if it's not the normal way of doing things. you learn something anyway.

 

[burglar]

Hi Shield11,
Welcome to ASF!

It's an "all depends" question.
I think you have it pretty right

If you'd like my opinion ...

Auction action is what drives share price.
It depends in part on news. (but not necessarily)
It depends in part on the direction of the market.
(spikes on "acute" news can go against a falling market, but are generally muted)

Yes, the price re-rates a day or two after a spike.
Then drifts away slowly as disinterest sets in.

View attachment 60022

This may help ?? or not?
Best post I have seen on AUCTION ACTION:

https://www.aussiestockforums.com/forums/showthread.php?t=27685&p=802890#post802890

I had suspected that you might be guessing!

 

[grah33]

I had suspected that you might be guessing!

yes, i'm guessing, but if i keep cutting out the bad ones early (3.5% decrease means exit) and running the better ones, it might work. i'm assumming i guess that 1/2 the stocks i pick are bad and the other half are good. or maybe it will work much better when the market is rising.


you mentioned that the overall market effects stocks prices significantly. can you give me more detail on this with numbers. i take it we should always be looking at the general index (all ordinaries, and individual sector indices) because if these guys go down, our stocks tend to follow. what kind of change in index value is significant and /or for how long? maybe if index is going up most of the top gains stocks will be good picks? don't know, just musing around and trying to understand. any information on how the overall index effects inidividual stocks would be helpful.

 

[Wysiwyg]

yes, i'm guessing, but if i keep cutting out the bad ones early (3.5% decrease means exit) and running the better ones, it might work.

Hope ye not see this as butting in but 3.5% isn't a lot of (as Tech/A says) wiggle room. Many stocks make that range in a day and most in a week so you would be taking lots of stop outs and paying lots of brokerage. I have just run two simple system backtests for the last 12 months. One with a 3.5% stop loss on the left with 18 consecutive losers and on the right with a 15% stop loss and 3 consecutive losers. Not to mention the profit and drawdown. If you check the statistics you will see great variation. The wiggle range will vary between stocks.

 

[tech/a]

I think this is a position sizing issue .
What G is trying to do is minimize risk.
His idea is to quit a trade if it falls 3.5%

Better to use % of equity loss rather than stock price loss.

Here is an example.
You buy Stock XYZ at $1
You don't want to lose more than 1% of your $10000 equity.---$100
But you want to give the stock 15% wiggle room.

That's 15c so you dont want to risk more than $100
So to do this you can buy 667 shares ---$100/.15 = 667

So you get your wriggle room and satisfy risk.

You can of course adjust
Wiggle room %
Equity % risk

But of course no amount of Risk management will save an inherently unprofitable trading method

Personally Id place Guessing in this group.

 

[burglar]

... i'm assumming i guess that 1/2 the stocks i pick are bad and the other half are good. or maybe it will work much better when the market is rising.

I see you are learning a lot!

You are now cutting your losers and running your winners!
This is opposite to where you were (and in my opinion incorrect)!

Forget about bad picks vs good picks.
It is not the path to profitability.
It will lead you up the garden path.

Read more of tech/a posts to find out what will make you profitable!

 

[Habakkuk]

Hope ye not see this as butting in but 3.5% isn't a lot of (as Tech/A says) wiggle room. Many stocks make that range in a day and most in a week so you would be taking lots of stop outs and paying lots of brokerage. I have just run two simple system backtests for the last 12 months. One with a 3.5% stop loss on the left with 18 consecutive losers and on the right with a 15% stop loss and 3 consecutive losers. Not to mention the profit and drawdown. If you check the statistics you will see great variation. The wiggle range will vary between stocks.

View attachment 61264

How do you get negative exposure in the system on the right?
I've never seen that in Amibroker.
Are they the same system with different stop loss?

 

[Julia]

Better to use % of equity loss rather than stock price loss.

It would never have occurred to me to do other than this. It's always % win or loss on your total investment that counts, not individual SP movement which, as wysiwyg points out, can be considerable in a very short time.

Personally Id place Guessing in this group.

+1. And why I've asked how the stock selection process occurs with the OP.
Just randomly picking a bunch of stocks, without any qualifying criteria, might be fun in a game, but isn't going to cut in the real money world.

 

[Wysiwyg]

How do you get negative exposure in the system on the right?
I've never seen that in Amibroker.
Are they the same system with different stop loss?

Amibroker backtest program prints the numbers and Amibroker docs. states -
1) Exposure % - 'Market exposure of the trading system calculated on bar by bar basis. Sum of bar exposures divided by number of bars. Single bar exposure is the value of open positions divided by portfolio equity.

2) The only difference is the left test is 3.5% stop loss and the right test is 15% stop loss.

 

[Habakkuk]

Amibroker backtest program prints the numbers and Amibroker docs. states -
1) Exposure % - 'Market exposure of the trading system calculated on bar by bar basis. Sum of bar exposures divided by number of bars. Single bar exposure is the value of open positions divided by portfolio equity..

I know that, but I can't figure out why it shows NEGATIVE exposure on the right. What does that mean ?
How is that even possible ?
But don't worry too much about it. I was just surprised to see such a big difference due to the stop loss parameter.
I thought they had to be different systems.

 

[Wysiwyg]

But don't worry too much about it. I was just surprised to see such a big difference due to the stop loss parameter.
I thought they had to be different systems.

Obvious on a real time trading daily basis. Daily price range of 3.5% or greater is common therefore a buy one day and forced sell the next day would be all too common as the backtest results show and real life trading shows. A daily price range of 15% is much less common. A 15% move usually takes longer than a day or two or three.
A fixed percentage stop is a dumb idea anyhow as volatility varies with every security.

 

[Wysiwyg]

Is there anything basic besides trading with a trend or trading pivot points? I feel I am at the end of a long journey and have come full circle.

 

[CanOz]

Is there anything basic besides trading with a trend or trading pivot points? I feel I am at the end of a long journey and have come full circle.

Well every trading method attempts to capture a small amount of trend, therefore in reality every system or method is trend trading by nature . Why are pivot points basic and who says they work any better than random lines?

Is you want something simple, try a condition then a pattern...example, trend/stall /trap / continue

 

[Quant]

The title of this thread is an oxymoron i'm afraid , well especially in the current range bound market . BASIC = mediocre in my mind ... good luck with it , systems that stand the test of time with acceptable drawdowns are never basic for if it was so everyone would be rich . I like the fact its hard for obvious reasons

Close this thread ... my



Oh and Wysiwyg , my signature leads to the yellow brick road
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