Technical Trading Exercise (Pavilion103 and tech/a) Discussion

[pavilion103]

Will update spreadsheets soon as we have some more activity again!

I'll see how I go. Big bday party at mine tonight! Plenty to prepare this arvo!!

 

[pavilion103]

FKP is a particularly interesting one which came up in my high volume scan also.

Boy oh boy wowee. What happened on that day!

 

[nulla nulla]

FKP is a particularly interesting one which came up in my high volume scan also.

Boy oh boy wowee. What happened on that day!

SGP took up their entitlement and unloaded their entire holding (existing shares and entitlement) via Goldman Sachs. FKP are happy as they also reached an agreement with SGP for SGP to relinquish their entitlement to first right of refusal over some of the assets of FKP.

 

[pavilion103]

I'm thinking Saturday morning is likely the next update from me. I'll get this all together.

Some thoughts from me, stocks worth checking out.

BPT
SEA
BTT
CAJ

 

[tech/a]

I'm thinking Saturday morning is likely the next update from me. I'll get this all together.

Some thoughts from me, stocks worth checking out.

BPT
SEA
BTT
CAJ

CAJ we are already on that?

 

[pavilion103]

Sorry my mistake. Didn't check!

Maybe a good consolidation before another break

 

[skc]

Actually the first trade was placed on 15 Jul. The thread started in May and Tech/a wisely adopted a "no position as a position" stance for the first 2 months or so.

For reference, XJOAI on 21 May was 42073, on 15 Jul was 40621, today it was 44924. So market is up 6.8% since 21 May and 10.6% since 15 Jul.

Yes I am disappointed with the results.
Purely on a market basis.
Looking back at the larger majority of trades closed
few turned and went on with it. In fact many kept falling.

I would think that had we had a buy and hold strategy we would
be worse off.
What I am happy with is the draw down being kept to reasonable levels.

The buy and hold equity curve (assuming all positions held until now, without considering dividends)... note that you wouldn't have been able to hold all these positions at the same time. So the actual buy and hold performance would be much lower, but probably still >$10k in profit which would have outperformed the market.



To me the main issue with the poor performance so far is that stops were too close. The stats so far showed avg win $833, avg loss -$297 and win% of 30%. So imo the avg win/avg loss is respectable, but the win% is on the low side.

Risk = probability of occurance x consequence of occurance. With a tight stop, the "consequence" is kept small, but the "probability" of occurance is significantly increased. It would be an interesting exercise to look at how stops compared to the volatility (say in ATR terms) of the stocks traded.

 

[Gringotts Bank]

Actually the first trade ...

Where have you been lurking?

 

[skc]

Where have you been lurking?

Just came back from a 3-week break.

 

[pavilion103]

Speaking for myself, I like this approach.

I think it's easy in hindsight when the market is running up to think that it is best to just hold. What I particularly like about this approach is:
1) exit when the momentum is lagging
2) get in new stocks when momentum is identified. I.e. Good opportunity cost of limited capital.

Like you said, we wouldn't have been able to hold them all during the run up and who is to say which ones we would have held.

It is a fair question in terms of what is the optimal stop in a particular market. This exercise is certainly on the tight side.

I'd love to hear Tech's thoughts on this also.

Having said that VRL was probably trailed less aggressively than I would have done so and it was the most profitable, so letting this one run a bit was beneficial. However it did provide a period of consolidation that may have allowed re entry.

Some interesting considerations in your post.

 

[craft]

Just came back from a 3-week break.

Welcome back - hope you had a good time.

 

[craft]

Speaking for myself, I like this approach.

I think it's easy in hindsight when the market is running up to think that it is best to just hold. What I particularly like about this approach is:
1) exit when the momentum is lagging
2) get in new stocks when momentum is identified. I.e. Good opportunity cost of limited capital.

What has the price you brought at got to do with either of these points?

How does scratching a trade at a rather arbitrary number (your breakeven) help?

The whole calculation for profitability includes opportunity x expectancy – each time you scratch at breakeven you effectively reduce your opportunity as that trade might as well never existed plus you have to reposition by once again opening up at full risk.

For your approach it makes sense to reduce if momentum is lagging but do it on collective price information – your buy price should have nothing to do with it – it’s just one tiny piece of chart history – An exit on lagging momentum grounds should only occur at breakeven by coincidence.

Question – Is breakeven stops a psychological crutch or a valid means of maximising profitability or something in-between.

 

[peter2]

The expectancy (using the stats from skc) with a W% = 30% and AW/AL = 2.8 is only 0.14.

IMO this is a poor edge extracted from the recent bullish market conditions. I would expect a value at least 0.3 to 0.7. Surprisingly the stats aren't very far from my minimum value of 0.3. If the W% was increased to 35% or the AW/AL was increased to 3.0 the expectancy's would be > 0.3. This would double the profit.

I agree with skc in that the W% is too low rather than the AW/AL. The AW/AL might have been much better with the inclusion of only one good winner. Does your trade management allow for such an event or do you raise your TS higher than BE too quickly? We all realise that selecting the right TS is an art form (unless you have back-tested results). IMO TS's should be very tight or very loose. In-between doesn't work out well.

The basic foundation of this approach is to have a go but limit the losses. I agree with this approach but question whether you are letting your winners get big enough to compensate for all your work.

Great question craft. (I like it when you hang around.)
After the entry, the second most worrying time for a break-out trader is when price retests the original BO level. This tests the break-out traders' resolve while other traders who prefer to buy on support think this is an excellent low risk entry. A BO trader must expect the retest to happen and not exit near BE when it does. A successful retest (price resumes in the BO direction) is a high probability indicator for a winning trade (and a pyramiding opportunity).

 

[pavilion103]

You could just trade pullbacks. Look for different entry setups if the pullback to BE is so common. Do different scans. Take different setups.

 

[tech/a]

Thanks SKC and Peter for your (Your in the context of this reply---- below-- is not directed specifically at anyone but is used as a generic term for everyone else) comments.

In reply.

PAV originally came to me concerned that he wasn't making headway and his bank was being eroded quicker than he would like.

So I purposely traded in a discretionary manner with very strict management for a good reason.
Reason 1 was to show to PAV an on going trade management structure that was based upon a daily review of each trade. A habit that in my view should be adopted no matter what style you adopt for your own trading.

This exercise has shown that.

I wanted to show that you could use leverage safely without massive draw down.

This exercise has shown that.

I also wanted to show that recovery from a negative balance could and should be swift.

This exercise has definitely shown that.

I wanted to show that cutting losses short and letting winners run can be very lucrative.
While we only have 1 decent winner on the block.

The exercise has shown that.

I also wanted to show that once in a trade and the risk is mitigated then is the time to let the reigns a little looser.
A screaming bull market would definitely help all methods and demonstrate this premise far better---but

I think the exercise has also shown that.

Is it the method of methods---of course not.
Has it helped PAV--evidently.
Has it helped anyone else--unknown.

One thing I do know is that hind site evaluation will be correct 100% of the time.
But suggest that if you really want to prove to yourself --- you trade in the way you suggest is better than any one method shown here by any other poster who places up his real time trades.

Do it here and in real time like this.

You'll be surprised how completely different the results will be to your hind site evaluations.

In the meantime I will continue if there is the interest.

However if the purpose has been served and is not seen as beneficial then I'm happy to stop.
I have plenty of other things to keep me busy.

 

[pavilion103]

Would be keen for some of those guys to do a similar live exercise online. If it proves more beneficial then it will be a help to everyone and possible adjustments can be made.

 

[Ves]

Hey guys - is there any reason for the long-only bias so far? I notice that the spreadsheet seems to indicate that "short" positions are possible for this strategy - but haven't seen any yet. Whilst I don't trade technicals, it is still interesting to see how others fare. Thanks for sharing your journey so far.

 

[wayneL]

Thanks SKC and Peter for your (Your in the context of this reply---- below-- is not directed specifically at anyone but is used as a generic term for everyone else) comments.

In reply.

PAV originally came to me concerned that he wasn't making headway and his bank was being eroded quicker than he would like.

So I purposely traded in a discretionary manner with very strict management for a good reason.
Reason 1 was to show to PAV an on going trade management structure that was based upon a daily review of each trade. A habit that in my view should be adopted no matter what style you adopt for your own trading.

This exercise has shown that.

I wanted to show that you could use leverage safely without massive draw down.

This exercise has shown that.

I also wanted to show that recovery from a negative balance could and should be swift.

This exercise has definitely shown that.

I wanted to show that cutting losses short and letting winners run can be very lucrative.
While we only have 1 decent winner on the block.

The exercise has shown that.

I also wanted to show that once in a trade and the risk is mitigated then is the time to let the reigns a little looser.
A screaming bull market would definitely help all methods and demonstrate this premise far better---but

I think the exercise has also shown that.

Is it the method of methods---of course not.
Has it helped PAV--evidently.
Has it helped anyone else--unknown.

One thing I do know is that hind site evaluation will be correct 100% of the time.
But suggest that if you really want to prove to yourself --- you trade in the way you suggest is better than any one method shown here by any other poster who places up his real time trades.

Do it here and in real time like this.

You'll be surprised how completely different the results will be to your hind site evaluations.

In the meantime I will continue if there is the interest.

However if the purpose has been served and is not seen as beneficial then I'm happy to stop.
I have plenty of other things to keep me busy.

I reckon any real time posting of trading is instrutioanl, particularly with regards to my bold above.

We could use such honesty in some of the option threads... well, one in particular.

 

[peter2]

I agree, this has been a valuable exercise. I'm a huge supporter of anyone that journals their trading as close to real-time as possible. I would suggest that all of the experienced forum members would be supportive of these journals. There would probably be more journals if it weren't for the restrictions on providing financial advice. I think this thread has helped quite a few readers with their trading attempts. Most people attempt to trade with insufficient funds and the only way to ensure their survival is tight risk control. This thread has done an excellent job of highlighting that aspect.

The results are positive without any large winners. If you continue its highly probable that you'll get a few good results which will boost the return significantly.

I hope you continue and I hope some of the less experienced traders who showed their enthusiasm at the start of this thread reappear and contribute more than they have during the thread. This exercise is a valuable real-time learning experience for the forum community and I hope it gathers enough support to rekindle the OP's passion for sharing.

 

[skc]

I think it's easy in hindsight when the market is running up to think that it is best to just hold. Like you said, we wouldn't have been able to hold them all during the run up and who is to say which ones we would have held.

I wasn't advocating a holding strategy. I was just putting numbers around tech/a's comment

I would think that had we had a buy and hold strategy we would be worse off.

Reason 1 was to show to PAV an on going trade management structure that was based upon a daily review of each trade. A habit that in my view should be adopted no matter what style you adopt for your own trading.

Agree with everything you've said. Plus all the other points of what you are trying to show in this thread...

One thing I do know is that hind site evaluation will be correct 100% of the time.

I'd call it performance review/improvement rather than hindsight evaluation.

You mentioned some statistics in the first period of you and Pav's trading... and they were quite different to what has transpired in this exercise. So it seems reasonable to wonder why - and the reason could be the market, trade management, stock selection, general randomness or some combination of the above.

I was just hoping to get you to show in this thread how you undertake performance review / continuous learning. But if that is not the main purpose of this exercise that's understandable.