Trading stocks under 20C (tech's method)

[tech/a]

OK firstly Im looking at the universe of 20c stocks Id like to trade.

Ive placed only one criteria here and thats liquidity.
I only want stocks that have traded over $100K average for the last 21 days.

So I have 82 in my universe.
Now of these 82.

At sometime in the past 50 days.

41 of these have risen atleast 33%
28 of these have risen atleast 50%
11 of these have risen atleast 100%
and 1 has risen 200%

Now this tells me that looking for a 50% rise is not un realistic.
It also tells me that if I limit my loss to 10% of Purchase price I have an expectancy of 5:1 If trades are held to 50% increase.

Now to design an entry and possibly a trailing stop for those impulse moves that get belted next day.

Ill be back.

tech

 

[stefan]

Now to design an entry and possibly a trailing stop for those impulse moves that get belted next day.

This sounds very interesting indeed. Keep it up tech/a! Looking forward to your next posting!

Happy trading

Stefan

 

[tech/a]

Well.
Tested about 50 theories and not one profitable!!(yet).

Just downloaded V 4 of Tradesim so will use the new software to test.
Need to print out the manual and have a read.

Ill be back but could be a while.
Im sure youll cope without me.

tech

 

[Lucstar]

Good to see that you're really making yourself at home here. LOL :drink:

 

[tech/a]

Hey I can go as quick as I came!!

If my input is not wanted or indeed needed happy to move on!

tech

 

[RichKid]

My guess is Lucstar didn't intend to offend you. I'm sure looking forward to seeing your next post so hope you hang around! All the best!

 

[markrmau]

Now of these 82.

At sometime in the past 50 days.

41 of these have risen atleast 33%
28 of these have risen atleast 50%
11 of these have risen atleast 100%
and 1 has risen 200%

What are the equivalent percentages for falls of 33%, 50%, 100%?

*If* the percentages are roughly the same, then I don't think that it is possible to come up with a method of trading to your advantage. (I am assuming that the movements up and down are due to randomly occuring events such as announcements).

It is possible however that investors react disproportionatley to good news or to bad news in which case it should be possible to come up with a tradable system. Of course once you do come up with a system, it will not work any more!

I am interested in what you come up.

Cheers,
Mark.

 

[tech/a]

RK.
and Lucstar.

Ok.

Mark thought the same myself and will run possibly tonight.

Im interested in why youd think that if the results balanced or indeed were weighted to the downside that developing a profitable trading method would not be possible?.(to the long side).

Just quickly we would(well I would anyway) have stops in place that were far less than the maximum falls in the universe of stocks.
The whole idea is to minimise risk to the downside.

I did not on some of the simulations that gaps down (and severe ones) were common place.Slippage is an issue with smalls.
Im not convinced that smalls are all people crack them up to be(little money spinners)but even though I trade the top ASX200 (Bt Margin list) Im curiuos like many here as to wether its possible to turn a consistant profit

Im encouraged by the run of contributors rushing to enter their ideas into the discussion--------------Come on people.

 

[markrmau]

Im interested in why youd think that if the results balanced or indeed were weighted to the downside that developing a profitable trading method would not be possible?.(to the long side).

Just quickly we would(well I would anyway) have stops in place that were far less than the maximum falls in the universe of stocks.
The whole idea is to minimise risk to the downside.

I did not on some of the simulations that gaps down (and severe ones) were common place.Slippage is an issue with smalls.

I am being overly cautious and am thinking that you may not have time to get out - I personally have no experience in this area.

Can you get intraday data for these stocks? How well do automatic stop-loss functions (such as on commsec work)?

 

[wayneL]

>>It also tells me that if I limit my loss to 10% of Purchase price <<

You may need to revise this on < $0.20 stocks. Thats not much wiggle room at all for these volatile little puppies.

Cheers

 

[Lucstar]

Oh no, i think i've just stirred up a bit of trouble. But thanks to RichKid, who manage to cool things down for me while i was away...thanks RK. Well tech, my post really did not mean to offend you and if it did, i'm truly sorry. Hope you enjoy ur time on this forum.

 

[tech/a]

Mark.

Yes I have intraday live feed via Marketcast in all timeframes.

Its good to see that some are recognising the inherant problems in trading the pennies.

Wayne your absolutely right take a 5c stock which falls to 4c thats a 20% fall!

So lets just recap.
We have a small initial capital base of $10K
If we wish to spread the risk by having a portfolio more than 5 stocks or $4K each appears un workable.
Workable stop losses are certaintly advisable and the saviour of many methods---we have identified that a small 10% stop of the purchase price is not workable.

My suggestion is that our universe of stocks to trade be such that a 10% stop is workable.
This would mean that at a pinch 10C stocks should be included as the minimum,and 50c as the maximum.

I still think youll get the leverage,volitility and more likely to get the liquidity to trade.

So Ill switch my method to 10c to 50c stocks and see if I cant get something that will turn a profit consistantly.
Back with some figures soon.

tech

 

[tech/a]

Ok.

Now running a scan on the All Ords with a liquidity filter of $100000 minimum traded a day on average for a month.

The results are for stocks trading 10c to 50c

80 prospects for our Universe of stocks.
50 have risen 33% at sometime in the last 50 days
25 have risen 50% at sometime in the last 50 days
9 100%
2 200%
1 300%
1 400%
1 500%

To be balanced.
11 prospects had fallen 30% at sometime in the last 50 days
2 50%
1 75%

Of all stocks in the universe(82) 71 are higher today than they were 50 days ago.
Now if thats not a sign of a bull market what is!!

49 of the 82 are higher today than they were a year ago!

Now I chose 4 charts at random to see if I could find an obvious reason for entry.What do you think??

This looks promising even without doing any testing ,that we should be able to develope a profitable method to trdae these.
Ill be back when Ive had time to throw some tests together.
Think the breakout entry looks the goods!

The profit ofcourse comes from the EXIT!!

 

[Lucstar]

This is getting very technical (tats a good thing). Got me all puzzled tho. Its just too complicated for a young trader like me. So i'll just sit bak and learn

 

[kifoghorn]

This is getting very technical (tats a good thing). Got me all puzzled tho. Its just too complicated for a young trader like me. So i'll just sit bak and learn

For me to... As soon as figures are mentioned my brain stops

But interesting ideas...

 

[tech/a]

Hi.

Im interested in the last 2 comments.
I guess Ive taken it for granted that those contributing and those watching have at least a basic level of trading knowledge.Some Im sure have but there seems that quite a few dont.

Thats fine if you dont--------11 yrs ago the Financial Review was in another language to mine!!!---- but if you really wish to learn to trade or even invest, profitably its essential you UNDERSTAND what we are doing here.

If you dont please dont hold back----------ASK.

The biggest tradgedy I see are people who come and go----think its easy have a win or two or worse still loose a packet and give the trading game away as TOO RISKY or TO COMPLICATED.

Im happy to simplify it and cut out the "Voodoo"(Sure Ill be talking technical stuff but youll understand it!)

The MORE Questions YOU ask the More Others will learn!

Im hoping in the end that I will have walked those who wish to know,through the process of developing a trading method which can be traded profitably.

From here you will be able to take and indeed refer to the template to develope your own!!!Or a version of that which we develope here.

Hometrader charge about $5k to do this-----and the results are questionable seeing their success is based on using CFD's with 10X leverage.
So a method that returns 15% is touted as returning 150%-----Now you know how they do it!!

Even if you dont have the software ----YET.
Youll know what to look for and the reason/application/use of it in your trading.

So thanks Kifoghorn and Lucstar for pointing this out.
I lookforward to your questions.
Any other experienced guys/gals like to help me out here?

tech----John

 

[kifoghorn]

Ok whats CFDs and whats the best software, prefferable free

 

[RodC]

CFD's are Contracts for Difference. (a type of derivative) that gives quite high gearing/leverage.

check out this thread

https://www.aussiestockforums.com/forums/showthread.php?t=531

Rod.

 

[tech/a]

K.

I wouldnt be looking at CFD's while in your trading apprenticeship.

As for software Im afraid that unless your using a full service broker you wont have access to the software you need.

Even then it wont have the dexterity software like mine has.
EG I can search for prospects with certain criteria like I did to get some of the Stats above.
Youll also need a data feed which is again expensive to some.


My software data feed and live feed total around $4K.
Add to that Testing software and thats another 1.5K.

So can get up.

Cheapest testing and charting software thats anygood I think would have to be Amibroker.(I dont use it).

Data feed Just data a one Off $680 ish from memory.

Live feed I use Marketcast as its SBS rather than online.
$400 setup and $160/mth.

And they reckon the markets full of sharks!!!

tech

 

[still_in_school]

Hi Techa,

Tricom Brokers, now offer a platform, that is free for both trading the FX and commodities, the data feed is live, but no training is provided, unless requested.

though i have the program, i havent used it yet for online trading, as its still same price over the phone, as to the alternative online trading (and confirmation from your broker... if they trade is a wise trade.)

Cheers,
sis