Dump it Here

[Newt]

Thanks a million Trav, that is a brilliant suggestion. It is actually on my current Amibroker Price Chart. Now, I understand how I can best use it with the XAO Index. In the past I have used it for stocks only.
Aristotle

You might also want to backtest the effect of tightening exit stops (and as Trav said, not necessarily exiting immediately) but also not necessarily blocking all new entries. You can miss early moves in strong stocks coming out of bear markets if you rigidly refuse all buys.

Ultimately these choices will likely affect your future drawdown risk (and length of DD) but might also increase (or reduce) your upside growth. You'll have to find the balance you're most comfortable with.

You've no doubt read past posts by Skate about combining ROC with an Index filter - just one way of potentially adding some granularity to your trading plan and strategy code.

Peter2 handles the transition between bear and bull market conditions by varying the number of positions open and allowed portfolio risk. More than one way to skin the index filter cat.....

 

[Aristotle]

You might also want to backtest the effect of tightening exit stops (and as Trav said, not necessarily exiting immediately) but also not necessarily blocking all new entries. You can miss early moves in strong stocks coming out of bear markets if you rigidly refuse all buys.

Ultimately these choices will likely affect your future drawdown risk (and length of DD) but might also increase (or reduce) your upside growth. You'll have to find the balance you're most comfortable with.

You've no doubt read past posts by Skate about combining ROC with an Index filter - just one way of potentially adding some granularity to your trading plan and strategy code.

Peter2 handles the transition between bear and bull market conditions by varying the number of positions open and allowed portfolio risk. More than one way to skin the index filter cat.....

Thanks Newt.
You have raised an issue that I have often wrestled with over the years. For the past decade or so I have religiously set my stops at around 10% to 15% and have had various levels of success. Often the stops get me out too early and many times the market has rushed through them and not triggered.
At a recent seminar that I attended the speaker gave his philosophy on setting stop losses as follows:

"A stop loss is appropriate when trading one stock. But, when trading 10 or more stocks, you do not need a stop loss."

Newt, I would be interested to hear your opinion and that of other members on this approach to the setting of stop losses. I experienced a downside to this methodology in early March this year at the beginning of COVID 19, my wife and I were on holidays travelling around country Victoria where I did not have access to a internet connection. Consequently, several of the stocks in my portfolio are down 20% or more. Fortunately, a few stocks such as FPH, AEF and MP1 are going OK. So my dilemma now is how long should I hold on to stocks like: ALL, MQG, and PRU which are all in the red to the tune of 20% or more. Should I Hold or should I Sell.

I was in a similar situation during the GFC when I sold the whole portfolio, while a good friend who had a similar portfolio held on and he said: "If you sell you realize a loss." He was right, and today he is a very wealthy man, while I made a substantial loss.

So today, I don't use "mechanical" Stops I use "visual" stops in conjunction with a 3x ATR Trailing Stop on my Amibroker Chart. And, together with the several suggestions I have received in the last week on this thread, I will be monitoring my portfolio using my XAO Index Filter using the Buy/Sell Ribbon Indicator on the Daily & Weekly Charts.

Newt you said above:
"You've no doubt read past posts by Skate about combining ROC with an Index filter"
Well no I have not read Skate's post on this issue. That will be my next assignment.

Aristotle

 

[InsvestoBoy]

I was in a similar situation during the GFC when I sold the whole portfolio, while a good friend who had a similar portfolio held on and he said: "If you sell you realize a loss." He was right, and today he is a very wealthy man, while I made a substantial loss.

The disparity in your wealth is not because he didn't sell while you did, the disparity is because you didn't re-enter the market while he remained exposed.

 

[Skate]

"You've no doubt read past posts by Skate about combining ROC with an Index filter"
Well no I have not read Skate's post on this issue. That will be my next assignment.

@Aristotle you are an old hand at trading & now slowly learning about system trading. Mechanical system trading is full of benefits that some find difficult to understand let alone take the time to learn.

When do I sell?
You first have to consider all your holdings as individual trades not as one portfolio because that’s what they are. Your portfolio is a collection of individual trades & every stock presents its own individual trading challenge, its own separate battle to fight. It's important to remember that selling positions should be done on their own merits. Knowing when to sell "makes the money" & to make the decision I rely on my GTFO/StaleStop indicator with a variable trailing stop & with this combination it certainly adds value to the profitability of my strategies. With trading there are no rules & having no rules is scary. Traders without a solid trading plan wonder when to sell after the horse has bolted where seasoned traders are constantly monitoring this on an ongoing regular basis. How you handle your positions while controlling your emotions (the mental gymnastics) will eventually decide how successful you will be as a trader allowing you to fight another day. Trading has a high attrition rate when the going gets tough.

To answer your question more directly
If you are lacking in ideas when to sell a current position draw a line in the sand by using a Simple Moving Average. How? - Sell the position when the closing price is below the moving average of 50 weeks. The AmiBroker formula code if it helps is (Sell = C < MA(C,50);

Hyperlinks to read
https://www.aussiestockforums.com/posts/1060850/
https://www.aussiestockforums.com/posts/1067493/
https://www.aussiestockforums.com/posts/1067739/
https://www.aussiestockforums.com/posts/1061759/

Make the search feature your friend
Most questions that you can think to ask have most likely been answered before so the first port of call should be the "search feature".

Skate.

 

[Aristotle]

The disparity in your wealth is not because he didn't sell while you did, the disparity is because you didn't re-enter the market while he remained exposed.

@InvestoBoy
Yes!, point taken you are right, but when you lose a heap of money as I did in the GFC, it really does sting a lot. So much so that I got out the market for a year or two.
Aristotle

 

[Skate]

The Action Strategy is still on track to commence trading next week so an addition post is in order.

Scary
Trading is scary when you trust a system developed by someone else but rest assured I wouldn’t be trading the Action Strategy if I didn’t think I could snag a few dollars from this exercise. In this game you need to have everything working in your favour & success depend on following the system without hesitation or bias. If the ACTION strategy snags a good trend it can ride it for quite some time - the duds will be sold quickly. Trading is not a sprint, we intend to make money over time, slow & steady at first than hopefully snowballing into profit from then on.

The Action Strategy rules:
1. There will be no thinking involved
2. Signals will be taken in order they are listed
3. Buy orders placed in the pre-auction will be "good for day" only
4. Never alter the (a) Buy Offer or (b) the QTY of shares to buy
5. On a sell signal, sell the whole position at the "Offer Price" in the pre-auction
6. If the position has not sold by 10:30am – “sell at market”
7. If I fail to post weekly updates, liquidate all positions "at market"

Being picky
There are some companies I don't particularly like & I believe they will end up being a loser if I buy them. Being tempted to miss one company & buy the next haphazardly will throw a spanner in the works. If you are tempted to pick & choose "Don't do it". The strategy has been well tested & deviating from the plan can be a disaster.

Timing the markets
Systematic Trend Traders rely heavily on "timing the markets" buying & selling positions at the wrong time is a recipe for disaster. Some traders are pessimistic by nature having a gut feeling that this current correction will turn into a sharper decline lasting longer than the normal fluctuations of the markets adding to the problem.

Current issue
The problem with the Action strategy is that it has limited performance in "Bear market" but it's a rip snorter in a raging Bull market. I have multiple protections built in to limit losses when the markets are trending sideways or falling. Like boxing sometimes you need to take some hits to win in the long run. Confidence & perseverance is needed in spades to trade the Action Strategy. With my $20K on the line I've tried to leave nothing to chance.

Skate.

 

[Aristotle]

@Aristotle you are an old hand at trading & now slowly learning about system trading. Mechanical system trading is full of benefits that some find difficult to understand let alone take the time to learn.

When do I sell?
You first have to consider all your holdings as individual trades not as one portfolio because that’s what they are. Your portfolio is a collection of individual trades & every stock presents its own individual trading challenge, its own separate battle to fight. It's important to remember that selling positions should be done on their own merits. Knowing when to sell "makes the money" & to make the decision I rely on my GTFO/StaleStop indicator with a variable trailing stop & with this combination it certainly adds value to the profitability of my strategies. With trading there are no rules & having no rules is scary. Traders without a solid trading plan wonder when to sell after the horse has bolted where seasoned traders are constantly monitoring this on an ongoing regular basis. How you handle your positions while controlling your emotions (the mental gymnastics) will eventually decide how successful you will be as a trader allowing you to fight another day. Trading has a high attrition rate when the going gets tough.

To answer your question more directly
If you are lacking in ideas when to sell a current position draw a line in the sand by using a Simple Moving Average. How? - Sell the position when the closing price is below the moving average of 50 weeks. The AmiBroker formula code if it helps is (Sell = C < MA(C,50);

Hyperlinks to read
https://www.aussiestockforums.com/posts/1060850/
https://www.aussiestockforums.com/posts/1067493/
https://www.aussiestockforums.com/posts/1067739/
https://www.aussiestockforums.com/posts/1061759/

Make the search feature your friend
Most questions that you can think to ask have most likely been answered before so the first port of call should be the "search feature".

Skate.

@Skate
Thank you Skate. When I wrote my first post only a week ago, I had only read the first 40 pages of your posts, and I was most impressed with the philosophy you presented about life in general.
But since then I have moved on to page to Page 41 and beyond and I am now experiencing a real "Eureka Moment", a moment of discovery, inspiration, and insight about Technical Trading and Analysis that I have never seen before.
I am a slow reader, so it will probably take me a week or two get through and absorb the rest of it. But, I will be back.
Aristotle

 

[Skate]

@Skate
Thank you Skate. When I wrote my first post only a week ago, I had only read the first 40 pages of your posts, and I was most impressed with the philosophy you presented about life in general.
But since then I have moved on to page to Page 41 and beyond and I am now experiencing a real "Eureka Moment", a moment of discovery, inspiration, and insight about Technical Trading and Analysis that I have never seen before.
I am a slow reader, so it will probably take me a week or two get through and absorb the rest of it. But, I will be back.
Aristotle

Good work, just don't speed read any of my posts - you need to take your time to understand how they can help you. When you’re dealing with your own money, trading gets very complicated, very quickly! - this is why self education is so important.

Skate.

 

[Skate]

I missed a few points
(a) Following along with the Action Strategy is not for the faint hearted because initially the strategy can lose money before it moves into profits.
(b) With all new strategies it take time to develop from a losing strategy into one that makes money but only if all goes well & luck is on our side.
(c) Don't be disheartened if the Action strategy is not performing - don't stop believing no matter what.
(d) Remember, I want to make money, that’s my end game.

Uncertainty
None of us know what's going to happen next in the markets so it's vital that we follow our trading rules consistently otherwise it can destroy the strategies edge. The benefit of trading a mechanical system is "consistence of signals" & when you can trust your strategy signals it gives you the added confidence to keep pulling the trigger. I'll be concentrating on timing the exit with consistency as there are an abundance of entry opportunities.

Footnote
There are so many who refuse to take responsibility when trading goes wrong, the problem is always caused by someone or something else. Ultimately the decision to trade is your responsibility.

Skate.

 

[ducati916]

View attachment 103265
The Action Strategy is still on track to commence trading next week so an addition post is in order.

Scary
Trading is scary when you trust a system developed by someone else but rest assured I wouldn’t be trading the Action Strategy if I didn’t think I could snag a few dollars from this exercise. In this game you need to have everything working in your favour & success depend on following the system without hesitation or bias. If the ACTION strategy snags a good trend it can ride it for quite some time - the duds will be sold quickly. Trading is not a sprint, we intend to make money over time, slow & steady at first than hopefully snowballing into profit from then on.

The Action Strategy rules:
1. There will be no thinking involved
2. Signals will be taken in order they are listed
3. Buy orders placed in the pre-auction will be "good for day" only
4. Never alter the (a) Buy Offer or (b) the QTY of shares to buy
5. On a sell signal, sell the whole position at the "Offer Price" in the pre-auction
6. If the position has not sold by 10:30am – “sell at market”
7. If I fail to post weekly updates, liquidate all positions "at market"

Being picky
There are some companies I don't particularly like & I believe they will end up being a loser if I buy them. Being tempted to miss one company & buy the next haphazardly will throw a spanner in the works. If you are tempted to pick & choose "Don't do it". The strategy has been well tested & deviating from the plan can be a disaster.

Timing the markets
Systematic Trend Traders rely heavily on "timing the markets" buying & selling positions at the wrong time is a recipe for disaster. Some traders are pessimistic by nature having a gut feeling that this current correction will turn into a sharper decline lasting longer than the normal fluctuations of the markets adding to the problem.

Current issue
The problem with the Action strategy is that it has limited performance in "Bear market" but it's a rip snorter in a raging Bull market. I have multiple protections built in to limit losses when the markets are trending sideways or falling. Like boxing sometimes you need to take some hits to win in the long run. Confidence & perseverance is needed in spades to trade the Action Strategy. With my $20K on the line I've tried to leave nothing to chance.

Skate.

A question: what happens to the profits? Do you:

(a) sweep them out of the (starting) capital; or
(b) leave them in to compound.

I haven't really noticed that this topic has been addressed. My personal preference is (b).

jog on
duc

 

[Skate]

A question: what happens to the profits?

Commission drag
@ducati916 that's a great question. To answer the question succinctly - Profits add additional positions to the portfolio. Commission drag won't allow rebalancing of position sizes & that's why they need to be fixed. (As stated - Fixed Position Sizing: $1,000 with "NO" re-balancing)

All available funds need to be put to work.
Commission drag has already been calculated so it's not possible to increase position sizing (bet sizes) which leaves the option to increase the number of positions in the portfolio. Extra positions are calculated form (a) existing available funds or (b) from "closed profits" in the portfolio. This means if the open profits or available funds are greater than $1k but less than $2k it allows another position to be added to the portfolio. If the open profits are greater than $2k but less than $3k it allows two extra position to be added to the portfolio & so on.

Rebalancing & Pyramiding
Questions relating to how I rebalance profits in my active trading strategies (not the Action Strategy of course) can be found here: https://www.aussiestockforums.com/posts/1055850/ & here: https://www.aussiestockforums.com/posts/1052241/

Skate.

 

[Rsthree]

View attachment 103265
The Action Strategy is still on track to commence trading next week so an addition post is in order.

The Action Strategy rules:
7. If I fail to post weekly updates, liquidate all positions "at market"

Skate.

So this is the fail safe (GTFO) for Skate being run over by a bus.... I'm surprised you haven't been able to code this one already.

 

[willoneau]

Hi Skate , I look forward to being involved as my weekly system still hasn't turned on.

 

[Newt]

Podcast to share - currently working my way through this "Trading Conversations" podcast between Phillip Teo and Jerry Parker (one of the original "Turtles").

I've listened to a few Jerry Parker interviews and incorrectly thought this might be familiar territory requiring some "Fast forwarding" - but wasn't at all tempted to skip anything. A few things that I found valuable that might benefit others:

1. Parker notes that traders tend to constantly collect knowledge, keep some processes and throw away others, but eventually put their own "stamp" on everything that remains
2. Finding a good fit with a trading strategy is very important - don't necessarily expect the strategy to fit closely with your personality, but it should take advantage of your particular skills
3. Trend following is generally not intuiative, nor easy to stick with - and Parker notes this could also be why it can be so profitable and so many give up on it
4. Over the years, his need to move to longer timeframes and cope with greater drawdowns and equity curve "lumpiness" - again very hard for many to tolerate. He says would love to make "1% a month", but it doesn't work that way.

Anyhow, couldn't help thinking of the parallels as Skate's incoming Action Strategy "Turtles" get ready to tackle the markets armed with their new strategy

 

[Newt]

Thanks Newt.
You have raised an issue that I have often wrestled with over the years. For the past decade or so I have religiously set my stops at around 10% to 15% and have had various levels of success. Often the stops get me out too early and many times the market has rushed through them and not triggered.
At a recent seminar that I attended the speaker gave his philosophy on setting stop losses as follows:

"A stop loss is appropriate when trading one stock. But, when trading 10 or more stocks, you do not need a stop loss."

Newt, I would be interested to hear your opinion and that of other members on this approach to the setting of stop losses. I experienced a downside to this methodology in early March this year at the beginning of COVID 19, my wife and I were on holidays travelling around country Victoria where I did not have access to a internet connection. Consequently, several of the stocks in my portfolio are down 20% or more. Fortunately, a few stocks such as FPH, AEF and MP1 are going OK. So my dilemma now is how long should I hold on to stocks like: ALL, MQG, and PRU which are all in the red to the tune of 20% or more. Should I Hold or should I Sell.

I was in a similar situation during the GFC when I sold the whole portfolio, while a good friend who had a similar portfolio held on and he said: "If you sell you realize a loss." He was right, and today he is a very wealthy man, while I made a substantial loss.

So today, I don't use "mechanical" Stops I use "visual" stops in conjunction with a 3x ATR Trailing Stop on my Amibroker Chart. And, together with the several suggestions I have received in the last week on this thread, I will be monitoring my portfolio using my XAO Index Filter using the Buy/Sell Ribbon Indicator on the Daily & Weekly Charts.

Newt you said above:
"You've no doubt read past posts by Skate about combining ROC with an Index filter"
Well no I have not read Skate's post on this issue. That will be my next assignment.

Aristotle

Hi Aristotle

Glad to hear you are getting benefit from the wealth of trading education treasure that is here to be found. I don't profess to have all the answers, as choice of exits (initial stop, trailing stop, Index/GTFO stop, etc) can be very personal choices, even between traders that might all be trading weekly trend following strategies. For systematic traders, your final decision will hopefully be grounded in confidence gained from data, backtesting and reastlistic assessment of future rewards versus assumed risk.

Some general suggestions that you expect to find across many traders:
- You need an exit plan and quantifiable risk before entering any trade
- A "stop" does not have to be actually active in the market, but at all times you must be cognizant where you strategy specificies an exit must be made (regardless of whether it is a win or a loss)
- Stops and exits are managed across individual trades, but the value of your exits (and strategy) will only ever be expressed across many trades (depending on probability) - no amount of worrying, praying, market monitoring allows us to effect what the markets will do
- Having a trailing stop indicator plotted on your stocks will not help if you don't already have a good trading plan and the conviction to execute signals as they come up

Unfortunately most of us don't just wake up one day with a lifelong robust trading plan - you'll learn and hopefully improve as you go. It does sound however like you currently hold stocks that you feel are "trades", but don't yet have a firm trading plan in place. I can't advise you what to do (moral and legal limitations), but one option is you could sell and realise any gains or losses until you have a trading plan in place. If however you do already have a strategy and trading plan in place, then you must hold or exit those positions that worry you as specified (otherwise you're not trading with a plan).

What my strategies "do":
- Don't enter without an established trend
- Have a wide but firm initial entry stop (generally around 30-40%)
- Have a trailing stop (e.g. ATR Chandalier or fixed %)
- Consider tightening trailing stop if market index filter turns "off"
- DON'T have "take profit" stops for weekly trend following
- if ever tempted to change my strategy or not take a signal, then backtest your reason for doing so and then either consider adding that new condition to your strategy or chastising yourself for trying to "awesomeize" it in the first place.


Hope this helps,
Newt

p.s. also lost plenty through GFC, but afterwards at least gained convinction to put decent effort into learning to trade over the long term

 

[Skate]

Anyhow, couldn't help thinking of the parallels as Skate's incoming Action Strategy "Turtles" get ready to tackle the markets armed with their new strategy

@Newt thanks for posting the podcast I'll have a listen tomorrow.

Reservations
I have reservations starting the new Action strategy with the current volatility "as the strategy prefers a Bull market" but there is never an ideal time to start. The Action Strategy has no problems picking the moves but current market sediment can get in the way. I'll be consistently trading the strategy no matter what otherwise it will destroy the strategies edge, I've put too much work into this strategy not to.

I'm in it for the money
This is a nice exercise for others to follow, trading a small position portfolio will be emotionally easy to handle. I'm trading the strategy to make a few bob along the way, well that's the plan.

Please read the "Footnote"
There are so many who refuse to take responsibility when trading goes wrong, the problem is always caused by someone or something else. "Ultimately the decision to trade is your responsibility".

Skate.

 

[Skate]

With all things being equal the Action Strategy is ready to start trading from Monday.

A worthy read
There is an article from News.com today that's worthy of a read to help make an informed decision about trading at this stage because ultimately the decision to trade is your responsibility.

Warning
Anyone tempted to buy stocks because they think they represent value as a result of the recent decline should be aware that forward earnings have collapsed across the board. Fear of missing out (FOMO) is a terrible reason to invest in the markets if you aren't financially educated as you are exposed to significant financial risks.

https://www.news.com.au/finance/mar...s/news-story/8a8b02d8530ae221fae6abf6d1925333

# “Even market professionals find it hard to time the market in a turbulent environment, and the risk of significant losses is a regular challenge,” ASIC said.

# “It’s fantastic that people are getting involved in the market, just go in with the expectation that it does take some time to learn how to invest and don’t expect to become a millionaire overnight. I look at it more as a process – if I was to learn any trade it would take two or three years. And it's the same with the market, it’s important to learn the lessons otherwise, at some point, you could end up getting burnt.” Burman chief investment officer Julia Lee said.

Skate.

 

[peter2]

@Skate yes, a timely reminder that trading without a plan is risky. ASIC released a report outlining the increased activity of retail traders during the CV selloff.

https://asic.gov.au/about-asic/news...retail-investors-at-risk-in-volatile-markets/

Additional details in the report (pdf) may surprise most. From the last page...

 

[qldfrog]

View attachment 103284
With all things being equal the Action Strategy is ready to start trading from Monday.

A worthy read
There is an article from News.com today that's worthy of a read to help make an informed decision about trading at this stage because ultimately the decision to trade is your responsibility.

Warning
Anyone tempted to buy stocks because they think they represent value as a result of the recent decline should be aware that forward earnings have collapsed across the board. Fear of missing out (FOMO) is a terrible reason to invest in the markets if you aren't financially educated as you are exposed to significant financial risks.

https://www.news.com.au/finance/mar...s/news-story/8a8b02d8530ae221fae6abf6d1925333

# “Even market professionals find it hard to time the market in a turbulent environment, and the risk of significant losses is a regular challenge,” ASIC said.

# “It’s fantastic that people are getting involved in the market, just go in with the expectation that it does take some time to learn how to invest and don’t expect to become a millionaire overnight. I look at it more as a process – if I was to learn any trade it would take two or three years. And it's the same with the market, it’s important to learn the lessons otherwise, at some point, you could end up getting burnt.” Burman chief investment officer Julia Lee said.

Skate.

I also added an entry in the Afterpay thread as it seems the rise and fall of Afterpay and the "easy" win some got has been a specific trigger.No get rich quick,I am afraid unless you are the one selling the book/seminar/black box.....

 

[Skate]

@Skate yes, a timely reminder that trading without a plan is risky. ASIC released a report outlining the increased activity of retail traders during the CV selloff. Additional details in the report (pdf) may surprise most.

@peter2 it's timely indeed to remind members that trading without a plan is a plan to fail. Trading is emotional at best but when "volatility meets large loses" your world can fall apart.

An Update: https://www.aussiestockforums.com/posts/1066919/
Before COVID-19 I was sitting on a large YTD profit. In two short weeks I managed to lose 70% of those profits. With "Billions wiped from the markets" we all felt the burn in one way or another.

Crawling my way back
With 9 weeks of trading under my belt I've been lucky inching my way back & within a few more weeks I'm expecting to be whole again. The last few weeks hasn't been all peaches & cream. The daily fluctuations have been hard to stomach as I've never experienced volatility like this before.

A section of my "Weekly Line Chart"
I'm posting the line chart so you can understand what I've had to endure these last few crazy weeks.



Lifted off the ASIC website
"ASIC analysis of markets during the COVID-19 period has revealed a substantial increase in retail activity across the securities market, as well as greater exposure to risk. We found that some retail investors are engaging in short term trading strategies unsuccessfully attempting to time price trends".

Skate.