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Greetings --

Why does it work??

The simple reason is that the broad market, and most of the stocks in it, have been rising strongly for the past 25 years.

This system restricts purchases to stocks with prices below $10. I made a posting to one of the threads here at ASF about historical prices, and how splits, distributions, and dividends distort historical prices. The point is, you cannot trust that the price in the historical data base was the price the stock actually traded at.

I ran the system on the S&P 500 stocks beginning 1/1/1995.

The system bought ebay on 11/23/98 at $8.04.

ebay did not trade at $8.04 in 1998. There have been four splits, totaling 24:1.
http://investor.ebay.com/faq.cfm
ebay was about $192.96 on 11/23/1998.

It would be interesting to test over a period of market decline, but that would require either removing the $10 limit (and changing the system), or having unadjusted historical data.

When I changed the test dates to begin 1/1/2005, using the 500 stocks in the S&P 500, only 15 stocks had trades, 6 were winners, 9 were losers. (I did not check to see if all of the trades could have taken place at less than $10.) The total exposure of the resulting trades (all 500 stocks for all 2.7 years) is 0.00006 -- 0.006% of the time. That is not enough data to allow meaningful statistical tests. And it is not enough data to give me a subjective feeling of comfort.

So --- why does it work? At the risk of getting some flack back, the cheeky answer is -- the system is confusing brains with a bull market.

Thanks,
Howard

<blockquote data-quote="howardbandy" data-source="post: 200748" data-attributes="member: 9179">Greetings --&nbsp; Why does it work??The simple reason is that the broad market, and most of the stocks in it, have been rising strongly for the past 25 years.This system restricts purchases to stocks with prices below $10.&nbsp; I made a posting to one of the threads here at ASF about historical prices, and how splits, distributions, and dividends distort historical prices.&nbsp; The point is, you cannot trust that the price in the historical data base was the price the stock actually traded at.I ran the system on the S&amp;P 500 stocks beginning 1/1/1995.&nbsp; The system bought ebay on 11/23/98 at $8.04.ebay did not trade at $8.04 in 1998.&nbsp; There have been four splits, totaling 24:1.<a href="http://investor.ebay.com/faq.cfm" target="_blank">http://investor.ebay.com/faq.cfm</a>ebay was about $192.96 on 11/23/1998.It would be interesting to test over a period of market decline, but that would require either removing the $10 limit (and changing the system), or having unadjusted historical data.When I changed the test dates to begin 1/1/2005, using the 500 stocks in the S&amp;P 500, only 15 stocks had trades, 6 were winners, 9 were losers.&nbsp; (I did not check to see if all of the trades could have taken place at less than $10.)&nbsp; The total exposure of the resulting trades (all 500 stocks for all 2.7 years) is 0.00006 -- 0.006% of the time.&nbsp; That is not enough data to allow meaningful statistical tests.&nbsp; And it is not enough data to give me a subjective feeling of comfort.So --- why does it work?&nbsp; At the risk of getting some flack back, the cheeky answer is -- the system is confusing brains with a bull market.&nbsp; Thanks,Howard</blockquote>

[QUOTE="howardbandy, post: 200748, member: 9179"] Greetings -- Why does it work?? The simple reason is that the broad market, and most of the stocks in it, have been rising strongly for the past 25 years. This system restricts purchases to stocks with prices below $10. I made a posting to one of the threads here at ASF about historical prices, and how splits, distributions, and dividends distort historical prices. The point is, you cannot trust that the price in the historical data base was the price the stock actually traded at. I ran the system on the S&P 500 stocks beginning 1/1/1995. The system bought ebay on 11/23/98 at $8.04. ebay did not trade at $8.04 in 1998. There have been four splits, totaling 24:1. [url]http://investor.ebay.com/faq.cfm[/url] ebay was about $192.96 on 11/23/1998. It would be interesting to test over a period of market decline, but that would require either removing the $10 limit (and changing the system), or having unadjusted historical data. When I changed the test dates to begin 1/1/2005, using the 500 stocks in the S&P 500, only 15 stocks had trades, 6 were winners, 9 were losers. (I did not check to see if all of the trades could have taken place at less than $10.) The total exposure of the resulting trades (all 500 stocks for all 2.7 years) is 0.00006 -- 0.006% of the time. That is not enough data to allow meaningful statistical tests. And it is not enough data to give me a subjective feeling of comfort. So --- why does it work? At the risk of getting some flack back, the cheeky answer is -- the system is confusing brains with a bull market. Thanks, Howard [/QUOTE]

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