Medium to Long term system development

[Milk Man]

I know how good f/a can be. The best trade i've ever made was fundamental-Australian Hospital Care: got taken over by Mayne. Need I say more.

If youve got the patience to do things fundamentally its great. I do plan on doing some business this way still; i'd like to do take-over bids on TV networks and send their owners to the poorhouse for being such lousy SOB's.
I like the whole robin hood type scenario- without the tights and poofy shoes that is.

But seriously, maybe we could develop a system based on f/a and t/a to trade live. (after i'm finished with the t/a threads would be good- missus keenon smashing computer already)

 

[tech/a]

Just a suggestion.

Why not pick your universe of stocks from F/A and time entry and exit with T/A.

MIT

I'd like someone who trades in a discretionary manner show live over say 6-12 mths that they can return better than 50% on capital invested----trading shares.--I am getting a bit more than that on T/T---well got that for 3 yrs before I sold the lot in June.

 

[mit]

I know how good f/a can be. The best trade i've ever made was fundamental-Australian Hospital Care: got taken over by Mayne. Need I say more.

But this is a single trade. I'm just wondering about people who systematically trade FA. What is their annual return/drawdown and so-on. I know most fund managers invest using primarily FA and on average barely make the index. But this is unfair as they have issues due to their size and rules in what they can and can't invest in.

But seriously, maybe we could develop a system based on f/a and t/a to trade live. (after i'm finished with the t/a threads would be good- missus keenon smashing computer already)

I'll see if I can find the pdf. The high PE system sounds interesting.

MIT

 

[Milk Man]

Yeah, the fundies aren't a fair view on f/a. They can't maneuver well enough with their size and theres sure to be a lot of corporate back-scratching going on.

 

[mit]

I'd like someone who trades in a discretionary manner show live over say 6-12 mths that they can return better than 50% on capital invested----trading shares.--I am getting a bit more than that on T/T---well got that for 3 yrs before I sold the lot in June.

Tech,

You would have to find someone who could do it and somebody who was motivated to do it. Somebody once said that it is easier to get somebody to talk about their sex-life than to admit what they make trading.

Guppy makes in his newsletter around 70% a year. I know he got a bit of a bad rap back in Stock Central days but I think that he got a bit lazy with his paper trading, not that he was cooking the books. Even if you took out the suspect exits then I still think that his profit was still high.

Alexander Elder mentions in his book classes of profitable trader and he talks about the best earning around 100% per year. Again not proof, but you rarely hear any thing bad said against Elder.

... But I could just be gullible ...

Some clues are that they don't really seem to actually have many trades per year, maybe a dozen or so, so they are very selective. Another clue is a comment by Linda Raschke (sp?) in that she day traded entries and exits and she said that turned some average systems into good systems. Change your system to buy on the low of the day and sell on the high of the day and see the difference. Not that you could always pick the highs and lows but a small improvement can make a large difference to your numbers.

Maybe, we mere mortals can do it. Run a 20%+ medium/long term system but be extremely picky on which buy signals to take. Say, look for two additional reasons to buy it (Just above a long term support, or nicely following a trend line).

Also don't just buy on the next day but wait for a short term entry signal and buy at the point in the day that is most likely to be the low for the day.

Same for exits.

MIT

 

[tech/a]

Also don't just buy on the next day but wait for a short term entry signal and buy at the point in the day that is most likely to be the low for the day.

Same for exits.

MIT

Done some work on this.
I found in the end that all averages out with enough trades.
Like selling or buying on the next open.
Sometimes the next open will be higher sometimes lower.
Sometimes youll pick it better sometimes youll be late or to early.

But yes I do agree that some discretionary element/s can increase performance.I've done it myself.
Your comment about frequency of trades makes sence.
I think that the more often you trade (Unless trading a single futures contract that you know) the more likely you are to lose.

 

[mit]

Tech,

Yeah, agree, I've tried backtesting it myself. I was thinking more like the following. You run the system. Get a couple of candidates. Put them on a watch list and watch their charts daily and use your basic TA for the entry. You might buy one because it has bounced off support with an initial very tight stop below the support or it may have just completed a 1-2-3 pattern (Initial stop at the 2). or it may have just had fulfilled a 5-day volatility break out.

After it starts moving you can revert to the longer stop used in the mechanical system but you may exit early because it had failed its trend line. Or has four black candles in a row on high volume Or the CEO has just been thrown in jail or it has just created a double top.

This might be worth doing in parallel with this project. Run a version mechanically and we can have heaps of fun fighting over best entries on our discretionary version.

MIT

 

[Milk Man]

I think the discretionary element in selecting buys will be very intresting when going live. Unsure on premature exit on untested parameters though.
Kind of undermines the system IMO.

 

[tech/a]

Loakglen

I agree,I think the discretionary part shouldnt be any of the parts which makeup the basis of the system.
Those that i use dont determine when to buy rather those prospects (which have been found by the entry criteria) are selected for eyeballed---best potential.

Again I'll mention my 2 criteria.

(1) Cant' have been ranging over a few years eg:- $1.20-1.65 up and back up and back--fairly tight range--unless the breakout entry is out of this range.

(2) Must either be in a clear trend OR Clearly breaking a down trend and breaking into a possible new up trend.

 

[idribble]

Hi there MIT. I am saying that companies will eventually realise their true value, and F/A will be the reason why. (F/A is obvious once it's happened!!, similar to the argument against T/A) I do agree with you that F/A is terribly difficult because you simply cannot have all the pieces to the jigsaw puzzle ..... then you have to take market sentiment into account.

I simply look for companies showing continued improving cashflow and cash, and buy on the dips (decent dips). ROC is a good example. Couldn't understand why the market lost interest in them. The CEO did an open briefing a few months ago and it made for compelling reading. They are no different a company now than they were a couple of months ago.

 

[idribble]

g'day techa, you posted >>(2) Must either be in a clear trend OR Clearly breaking a down trend and breaking into a possible new up trend.<<

What about a stock in a clear trend of improving cashflow? I'm not talking some piddly little tech or mining company, a decent company with a couple of quarters' of increasing cashflow and an improved balance sheet.

These companies are easy to find and are usually in one of the hot sectors. There are not normally too many of them, and they always seem to have plenty of price appreciation left in them AFTER a couple of good quarterly's.

 

[tech/a]

dribbles.

What you suggest would probably be fine.
I was just re stating the 2 I've adopted for Techtrader over the last 3 yrs.

 

[idribble]

I wasn't criticisng your post or the content tech/a.

Just putting forward a very, very simple way of selecting stocks, that shouldn't put you in a crook stock.

 

[tech/a]

Dribbles
I'm certaintly interested in anything that identifies a way of selecting a universe of prospects that has a stronger probability of a positive return than others,as this alone I have found will have a dramatic effect on your chances of success,in particular the degreee of success.

How would or where would you find information to do this?
Do you have a list from say 3 yrs ago? (I doubt it as this will be similar to identifying a margin list or the ASX 200 3 yrs ago.)--just that if you did we could test it.

 

[idribble]

Sorry, haven't got any database or the like.

 

[mit]

Try

http://www.ascii-data.com/index.html

It has some historical Fundie data.
MIT

 

[mit]

Back to the subject at hand. I did some more work on the system. I played with the actual breakout. I tried a second attempt at a breakout or if the breakout is the first actual 52 week high for 12 months and none gave a better results. Some seemed to increase the EXPECTANCY but reduced the OPPORTUNITY more. If we could take some leverage with CFDs it might be worthwhile.

I then looked at the system as is. I took out the Guppy GMA and it improved the result. I also dropped the liquidity requirement to $100k. The core buy code is now
=======================================================
New52WeekHigh = Ref(H,-1) >= Ref(HHV(H,250),-1);

Liquidity = EMA(V*C, period) > 100000 AND StrLen( Name() ) == 3;

Momentum = ROC(EMA(C,5),ROCPeriod) > ROCMin;

Buy =
New52WeekHigh
AND Liquidity
AND Momentum
;

BuyPrice = O; // Buy todays open
======================================================

This results in an average annual return of 39% and even a return of 20% to March-2003. I have included the entire report.

MIT

 

[tech/a]

Dropping the liquidity requirement would in some cases make a trade buy or sell impossible as there wouldnt be the volume to fill it.

Think youll find that universe selection will be more important and more positive than the entry.
Have you a stop in place?

Only other comments are that the R/R ratio is very low--under 2.5
and the recovery factor of 5 + is high.

 

[mit]

Tech,

Stop is a trailing stop at 6 atr.

The return is okay but I wouldn't trade it as yet. The drawdown is in one particular year but the other years do well. I think I'll look at the parameters now and see what happens.

The liquidity is lower but you are starting with $2k positions so it shouldn't be hard getting fills. Really for a beginner once you position grew you'd margin it and go for a system with a lower drawdown.

MIT

 

[Milk Man]

Well, after spending about 5 hours every day staring at this bloody monitor I have something I think we can trade!

51% annual return
51% winners
max. string of losses= 6
30.4% max. drawdown

To put that in perspective; if you started with $10000 at 1/1/95, you would now be the proud owner of $810000 worth of aussie stocks! (not counting tax, interest, divs etc)

Check the attachment for a full run-down.

Thank you to all who aided in its creation especially Greatpig and Kaveman for their Amibroker help and Tech/a for constant words of wisdom.

See you all in the Bahamas! :bier: