Tipping competition/buying indicators

[beaul]

I am new here and am trying to understand the various strategies traders use.

Recently I came across the 2009 tipping competition for ASF and thought i would analyse at what stage you guys bought in and why.

I tried a number of different indicators on all those stocks at the approx buying position and found that two indicators really stood out.
Bollinger bands and RSI.
Nearly ALL buying in all stocks was done just after the BB tightened.
It has been commented that BB is "late" information, so what instigated buying at that point.
The RSI was a little better at preceding buys but no other indicator even came close to matching those two.
Any comments,

 

[explod]

Re: tipping comp/buying indicators

I am new here and am trying to understand the various strategies traders use.

Recently I came across the 2009 tipping competition for ASF and thought i would analyse at what stage you guys bought in and why.

I tried a number of different indicators on all those stocks at the approx buying position and found that two indicators really stood out.
Bollinger bands and RSI.
Nearly ALL buying in all stocks was done just after the BB tightened.
It has been commented that BB is "late" information, so what instigated buying at that point.
The RSI was a little better at preceding buys but no other indicator even came close to matching those two.
Any comments,

Indicatros are just that and are fallable, as we are too. Indicators can show momentum well but there is no substitude for experience whihc unfortunately takes a long time.

It seems that most new to trading believe that the right computer driven gizmo will be the answer it is not.

In trend following for example one needs to see a firm 10% rise (or should I say change) from a period of say six months sideways consolidation. This is a simplistic example but to paint the picture.

No indicator will tell you exactly the right time to buy a stock.

 

[beaul]

Thats not what I am referring too.

90% of the winning trades in the competition had a contraction of the BB just before the shares were bought.
That is not a coincidence
and I am not saying that the BB initiated those trades.
But what did.?
remember 90% of those very sucessfull trades?
I would like someone to explain it to me.
I am not looking for the magic bullet,I am trying to understand how those sucessfull trades were initiated, if it wasn't the BB (which generally only records after the fact).?

 

[explod]

Bollinger bands in my understanding are built on trailing averages. A single trailing average will cut up the middle of them.

You may well have hit on a trigger that could also be explained by looking at swivel points, breaks in trend or resistance lines etc. Have you checked other indicators ?

 

[skyQuake]

Thats not what I am referring too.

90% of the winning trades in the competition had a contraction of the BB just before the shares were bought.
That is not a coincidence
and I am not saying that the BB initiated those trades.
But what did.?
remember 90% of those very sucessfull trades?
I would like someone to explain it to me.
I am not looking for the magic bullet,I am trying to understand how those sucessfull trades were initiated, if it wasn't the BB (which generally only records after the fact).?

Lucky guesses

But by definition, those big moves must always be accompanied by constriction in BBs? The expansion is relative to the dead quiet stock before the move usually.

 

[Wysiwyg]

Recently I came across the 2009 tipping competition for ASF and thought i would analyse at what stage you guys bought in and why.

Any comments,

I'm fairly sure the buy day was the same for every stock and doubt BB's would have been used in selection. No prize for winning so a stab in the dark would have been likely selection method.

 

[beaul]

"lucky guesses"
You must be joking.
The "buy" was not always followed by big moves at all. Some trades took six months to mature.
I tried a number of other indicators such as MACD and volume + and they did not sure any reliable pattern at all.
But RSI and Bollinger Bands were consistant in nearly all the sucessfull trades, as a buying indicator. (8 out of 9 if I remember correctly)
Another interesting point was that the trades that came out negative did NOT show any corellation with the BB at purchase.
Come on guys, I am sure there is a simple explanation and I would like to get a handle on it.

 

[beaul]

The buy days were months apart.
Most of the trades were very profitable so I doubt the "stab in the dark"
Is it That easy??
I agree that BB would not have been used so what I am asking is why the correlation. (8 out of 9 stocks)

 

[Wysiwyg]

Must be a different competition if the buy days are months apart. Usually start at the start of year. End at end of year.

 

[explod]

I have watch lists of small spec stocks that I have researched who I think have potential and with some developmental news likely. I watch these watch lists, some weekly some daily if I see a bit of movement. My ideal will be a stock that has not been doing anything for up to 6 or 12 months, say it has been trading between 9 and 10 cents, If I see a move to 11 or 12 cents with an increse in volume then I check it closer, if the buying looks stronger than seller lots and a number of other things I will put a small amount on, if it falls back by 5% with decreased volume from the 10% rise I am out, if it holds and breaks to 13 cents or more and amintains the liquidity/volume I increase my position. Now this is just an ideal scenario bit of my modelling, there are many variations based on gut.

Does it strike a cord for you

 

[beaul]

thank you explod, I appreciate your help.

wysiwyg.
It was the annual sock picking competition 2009. ORE won, Bau second

 

[skyQuake]

"lucky guesses"
You must be joking.
The "buy" was not always followed by big moves at all. Some trades took six months to mature.
I tried a number of other indicators such as MACD and volume + and they did not sure any reliable pattern at all.
But RSI and Bollinger Bands were consistant in nearly all the sucessfull trades, as a buying indicator. (8 out of 9 if I remember correctly)
Another interesting point was that the trades that came out negative did NOT show any corellation with the BB at purchase.
Come on guys, I am sure there is a simple explanation and I would like to get a handle on it.

8 out of 9? Not statistically significant at all...

The main thing is probably the bounce from the March lows. Most speccie stocks were 10 baggers because they fell 95%+ from their old values, and were simply retracing part of their fall.
Interest that the neg trades didnt follow the BB pattern though

 

[beaul]

skyquake.
Not good enough try harder.
8 out of 9 is significant and other than RSI no other indicator came even close.
Look I don't know why this is showing up like it does. Trade buys were months apart, some matured quickly some took months.
I will do some more testing and see what I can find.

 

[Wysiwyg]

I will do some more testing and see what I can find.

Pick five or so stocks now that match whatever you are seeing and make some gammon trades. Won't cost a cent and you will know for sure.

 

[skyQuake]

skyquake.
Not good enough try harder.
8 out of 9 is significant and other than RSI no other indicator came even close.
Look I don't know why this is showing up like it does. Trade buys were months apart, some matured quickly some took months.
I will do some more testing and see what I can find.

Tongue in cheek about the stat part, but seriously would you base any real strategy on a sample size of 9?
Maybe 900?
9000?
Try looking at before 2009 too, the results are a bit different.

 

[Trembling Hand]

Survivorship Bias.

The RSI went nuts because the share price went nuts. The BB expanded because the Price range expanded. BB are a based on standard deviation, so as the price increases so to does the range and therefore the stand deviation represented by the BB.

It not hard to imagine that the RSI was low after 08 in most stocks. What you need to look for is how many other stocks out of the odd 2400 on the exchange had the same condition and failed.

You cannot reverse engineer a system looking at success without taking into account the failures.

 

[beaul]

Trembling Hand your explanation does not support the evidence available.

Of the 31 stock submitted in the 2009 competition, some traders bought in January 2009 and some in October 2009.
26 traders made positive gains, 5 made losses.
When I reverse engineered and tested all 31 stocks using 7 different indicators, all 26 (who showed positive gains) bought their shares when the BB were "squeezed" ALL of them.
However the 5 losers did not.

I am sure you will agree that it is unlikely that all 26 positive traders used the BB as their trading signal, so what did they use.

I also found the RSI fitted into the same parameters (maybe both indicators are showing the same thing, lack of volatility.?

Or maybe they all made positive trades because they happened to buy when the volatility was low?

I don't accept your timing explanation, it does not fit.
I believe there is more to it than that and I would like to know.

Look, I am only trying to learn.
I am not trying to "blow my own trumpet" or say this is new (which it is not)
There is plenty of references to BB and RSI predicting breakouts in the literature.
I would just like an explanation, why you think in this case it appears to fit the evidence 100%.

 

[Trembling Hand]

beaul you are actually way off what I was talking about.

What I said to do is find ALL the stocks listed on the ASX that had the same conditions at the time and yet failed to register such gains only then will you know the failure rate of such patterns. What you are doing is in effect looking at the winners - that is survivorship bias. Which will always show indicators going nuts- in hindsight.

Secondly you need to then look under what conditions this pattern was successful. You could look at a simple 50 MA for the top 20 stocks from 2002 to 2007. at a guess, and clearly in hindsight, that would of been the only indicator you needed. But is that going to be applicable for 2010 to 2015??

There's your real problem. Its what I said in the other thread, context is what counts, are funds risk seeking or risk adverse?

 

[beaul]

Thank you, Trembling Hand.
I appreciate your comments, it all helps me to understand.
I mean that, I am not being a smart ****.

 

[tech/a]

T/h has nailed it
if you look back on any winning trade you'll notice indicator patterns.
The exact same patterns occur proud to a stock failing to be a winner.
To make it clear
Take 10stocks with exactly the same chart as the winning chart but 2 days before it appears to take off
What you'll find is perhsp a couple will end up home runs with charts that look easy to pick and others will just look crap.

Chrts are only as clear as crystal after a move.
Once you've looked at as many charts as we have you'll know what we mean