Speculative Stock Portfolio

[Zaxon]

The 20% drop on the index is the last line of defence for deciding drastic action such as portfolio liquidation.

It's that level of detail I'm working on in refining my plan as well. So this discussion comes at an excellent time!

You've got two choices on how to exit your positions. If you determine the bull market is over, you stop buying more stocks, and:
A) The Voluntary Retrenchment Method: use the risk management of your individual positions to exit their trades.
B) The Forced Retrenchment Method: "take all your shares around the back of the shed" and force liquidate them all, regardless of whether they're individually ready for it or not.

I like your suggestion of a 20% (official bear) as being the line in the sand. So after a drop below an MA, you would slowly exit positions as it made sense for that position. If the market hit the 20% - the rest get the chop.

A few more questions arise from this:

• After you liquid your positions, what then? You have the option of going to cash, or alternatively, trading futures/options/warrants to start profiting from the down market.
• An MA of how many days do you use? Typical figures used are: MA(50) = short term, and MA(200) = long term, but the days used is really arbitrary.
• What if the market enters an official Bear, but then trends sideways for a long period. Do you dabble in the sideways market? Do you wait for the 20% official Bull before re-entering?

 

[Trav.]

@aus_trader I found this site had a good example and explanation. I did trial it on my back tests but have switched of for now and will need further refining.

https://www.marketindex.com.au/asx-filter



Good luck mate

 

[tech/a]

Approx the 45 period and 105 period M/A crossover
So reasonably longer term
M/A s to me are at best an approximation.
In my view you need something more to confirm
That any crossover has a higher chance of being sustainable.

 

[Zaxon]

I found this site had a good example and explanation.

I'm quite familiar with this site. Their own testing shows a buy & hold approach outperformed their index-filter-driven market timing: 294% vs 149.5%



The point they make is that their drawdown was considerably lower: 8.4% vs 53.4% for buy & hold, and the profit/risk ratio is better.

I don't whether you can generalize these results, and whether buy & hold outperforms most index filtering or not over the long term. This is only one test. But I find the results quite interesting.

 

[Zaxon]

Approx the 45 period and 105 period M/A crossover
So reasonably longer term

Is that your "don't open any new positions" or "close out all existing positions" indicator?

 

[tech/a]

@aus_trader I found this site had a good example and explanation. I did trial it on my back tests but have switched of for now and will need further refining.

https://www.marketindex.com.au/asx-filter

View attachment 95459

Good luck mate

Talking about this Zaxon

 

[Zaxon]

Talking about this Zaxon

I believe they use 9 EMA cross over 21 EMA on weekly.

 

[tech/a]

Errrrrr Yeh

Roughly a 45 period and 105 period DAILY M/A

 

[Ann]

Errrrrr Yeh

Roughly a 45 period and 105 period DAILY M/A

I would have thought 45 and 105 daily might be a bit slow, a 9 and 21 daily would give a faster response without closing you out too often. You would have a long wait for a 45/105 daily cross on a weekly.

 

[Zaxon]

I would have thought 45 and 105 daily might be a bit slow

I agree. If you wait for a 105 day cross from the start of a bear market before you exit, you've missed the boat.

 

[tech/a]

Man oh man

A 9 period WEEKLY M/A is roughly equivalent to a 45 Day DAILY

Just saying thought you Technical geniuses would have got it!

 

[aus_trader]

It's that level of detail I'm working on in refining my plan as well. So this discussion comes at an excellent time!

You've got two choices on how to exit your positions. If you determine the bull market is over, you stop buying more stocks, and:
A) The Voluntary Retrenchment Method: use the risk management of your individual positions to exit their trades.
B) The Forced Retrenchment Method: "take all your shares around the back of the shed" and force liquidate them all, regardless of whether they're individually ready for it or not.

I like your suggestion of a 20% (official bear) as being the line in the sand. So after a drop below an MA, you would slowly exit positions as it made sense for that position. If the market hit the 20% - the rest get the chop.

A few more questions arise from this:

• After you liquid your positions, what then? You have the option of going to cash, or alternatively, trading futures/options/warrants to start profiting from the down market.
• An MA of how many days do you use? Typical figures used are: MA(50) = short term, and MA(200) = long term, but the days used is really arbitrary.
• What if the market enters an official Bear, but then trends sideways for a long period. Do you dabble in the sideways market? Do you wait for the 20% official Bull before re-entering?

Pretty much sums up my way of thinking as well.

The 20% index drop would be used to exit any "still remaining" positions that haven't been closed out using stop losses etc. Keep only what you wish to hold longer term e.g. a defensive stock that usually goes up in bear markets or gold related investments that you wish to not sell out of.

Getting back is not a sudden buy back with a 20% rise. That would be a very late entry. Start slow as the market rises and buy a few positions and only add more positions once market makes higher prices to keep exposure to a minimum during a bear market temporary rally.

 

[aus_trader]

@aus_trader I found this site had a good example and explanation. I did trial it on my back tests but have switched of for now and will need further refining.

https://www.marketindex.com.au/asx-filter

View attachment 95459

Good luck mate

Good article Trav.

 

[aus_trader]

Approx the 45 period and 105 period M/A crossover
So reasonably longer term
M/A s to me are at best an approximation.
In my view you need something more to confirm
That any crossover has a higher chance of being sustainable.

What other tools do you use to confirm ?

 

[tech/a]

What other tools do you use to confirm ?

I don’t use this at all
All I was doing was commenting on post #242
Sorry I’ll leave the room

Leave you all to it.

 

[Ann]

Man oh man

A 9 period WEEKLY M/A is roughly equivalent to a 45 Day DAILY

Just saying thought you Technical geniuses would have got it!

No Tech/a, the 9 and 21 is the daily MA placed onto a weekly chart. It is not a 9 weekly it is a 9 daily just placed over a weekly. That is what we are talking about.

 

[Zaxon]

gold related investments that you wish to not sell out of.

Yup. The exception being in 2008. Shares, property (in the US at least), and gold all crashed at the same time, which temporarily broke the conventional wisdom of gold being a risk-off asset, with a drop of 25%.

Getting back is not a sudden buy back with a 20% rise. That would be a very late entry. Start slow as the market rises and buy a few positions and only add more positions once market makes higher prices to keep exposure to a minimum during a bear market temporary rally.

I like that idea, and one I hadn't considered. In a sense, it mirrors what we do on the way down: a ramping of the number of positions we hold over time.

 

[Ann]

What other tools do you use to confirm ?

I don't believe Tech/a uses tools from the comments he has made to me in the past. I think his approach is pretty much just gaps and volume all the rest he regards as simply vanilla charts!

 

[tech/a]

Anne you can’t be serious

It’s a 9 Period each period is a week
9 weeks is 45 DAILY Periods used in a daily chart!

Back to T/A school

Think before you reply it makes you look like a novice.

 

[Ann]

Anne you can’t be serious

It’s a 9 Period each period is a week
9 weeks is 45 DAILY Periods used in a daily chart!

Back to T/A school

Think before you reply it makes you look like a novice.

I think you are blinding yourself with science Tech/a. KISS