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Kevin_in_GA
3,964 posts
msg #81139
Ignore Kevin_in_GA
10/15/2009 4:01:42 PM

I have posted a little bit on this before, having been impressed with TRO's Crock Pot filter for slow and steady gains. For those who have not seen this before, the basic concept is to filter for stocks that have consistently generated 1,2, or 3% gains from the WEEKLY OPEN to the WEEKLY HIGH. The concept is to find those stocks which have statistically been superior at meeting this criterion, buying at the open on Monday, and setting a profit stop at the desired percentage. Set it and forget it - a simple but powerful use of statistical advantages.

The original thread is located HERE

Will you hit the target every week? NO. But you will have a strong edge in hitting it, enough to make this a profitable system in most cases.

The concept was expanded by others to look at higher profit levels (thanks to kmcninvest for this). I have worked to refine it a bit, looking at not only statistical likelihood of success, but also likelihood of tripping stop losses. The following filter is built to select stocks with a strong track record of 5% per week, and also to calculate the probability of tripping a 10% stop loss. The filter looks back six months, and applies a weighting factor (similar to an EMA) that more highly values recent performance over past performance.

The filter is as follows:

Fetcher[

/*MEASURE THE DIFFERENCE FROM WEEKLY OPEN TO WEEKLY HIGH*/
set{whiop, weekly high - weekly open}
set{Long_Profit, whiop / weekly open }

/*DETERMINE THE FREQUENCY THAT 5% IS ACHIEVED OVER MULTIPLE TIME FRAMES*/
set{5_1wk, count(Long_Profit > .05,1)}
set{5_4wk, count(Long_Profit > .05,4)}
set{5_13wk, count(Long_Profit > .05,13)}

/*APPLY WEIGHTING FACTORS*/
set{var1,5_4wk*0.5} /*WEIGHT 4 WK AVERAGE AT 2X*/
set{var2,5_13wk*0.07692} /*WEIGHT 13 WK AVERAGE AT 1X*/

/*CREATE A WEIGHTED SUMMATION OF STOCK PERFORMANCE (MAX SCORE = 3)*/
set{reward,var1+var2}

/*DETERMINE THE RISK OF TRIPPING A 10% STOP LOSS*/
set{wloss, weekly open - weekly low}
set{max_loss, wloss / weekly open}

/*DETERMINE THE FREQUENCY THAT A 10% STOP LOSS IS TRIPPED OVER MULTIPLE TIME FRAMES*/
set{loss_1wk, count(max_loss > .10,1)}
set{loss_4wk, count(max_loss > .10,4)}
set{loss_13wk, count(max_loss > .10,13)}

/*APPLY WEIGHTING FACTORS*/
set{var11,loss_4wk*0.5} /*WEIGHT 4 WK AVERAGE AT 2X*/
set{var21,loss_13wk*0.07692} /*WEIGHT 13 WK AVERAGE AT 1X*/

/*CREATE A WEIGHTED SUMMATION OF RISK (MAX SCORE = 3)*/
set{risk,var11+var21}
set{performance,reward/risk}

add column performance
add column reward {reward}
add column risk {risk}
add column 5_4wk {4 wk reward}
add column loss_4wk {4 wk risk}
add column 5_13wk {13 wk reward}
add column loss_13wk {13 wk risk}

/*SCREEN FOR THE STRONGEST CANDIDATES*/
weekly open is above 1
average volume(90) above 500000
and reward is greater than 2.8

and draw 5_1wk
and draw loss_1wk on plot 5_1wk
and do not draw reward

sort column 6 descending

chart-display is weekly
]



The idea here is to choose the stock with THE HIGHEST REWARD SCORE, then sort the against lowest risk in case there is a tie. Column 5 ("performance") will give you a clear read on which is the best. However, having backtested against the performance score, it does not do nearly as well as first selecting the highest reward score, then picking the highest performance score among any ties.

In the following 52-week backtest I only took the top stock, but you can split your investments across the top 2-5 as you see fit.

Using daily data, I determined whether or not the 10% stop loss was triggered. If not, and if the 5% target was achieved, I gave it 5% for the week. If neither was hit, then I used the weekly close to determine the profit or loss.

In the infrequent case where both the 5% target AND the 10% stop loss were triggered on the same day (Mondays, usually), I gave the edge to the 5% profit target. No intraday data to see how those battles played out.

BACKTESTING OVER THE PAST 52 WEEKS:


Week of             Top Pick             Performance             Yield to Date

10/13/08             SMN             5.00%             5.00%
10/20/08             SMN             -10.00%             -5.50%
10/27/08             SRS             5.00%             -0.78%
11/03/08             SRS             5.00%             4.19%
11/10/08             SRS             5.00%             9.40%
11/17/08             SRS             5.00%             14.87%
11/24/08             SRS             5.00%             20.61%
12/01/08             SRS             5.00%             26.64%
12/08/08             SRS             -10.00%             13.98%
12/15/08             SRS             5.00%             19.67%
12/22/08             SRS             5.00%             25.66%
12/29/08             SRS             5.00%             31.94%
01/05/09             EGO             5.00%             38.54%
01/12/09             EGO             -10.00%             24.68%
01/20/09             SRS             5.00%             30.92%
01/26/09             SRS             5.00%             37.46%
02/02/09             SRS             -10.00%             23.72%
02/09/09             SRS             5.00%             29.90%
02/17/09             SRS             5.00%             36.40%
02/23/09             SKF             5.00%             43.22%
03/02/09             SKF             5.00%             50.38%
03/09/09             SKF             -10.00%             35.34%
03/16/09             LGND             -4.54%             29.20%
03/23/09             PDE             5.00%             35.66%
03/30/09             PDE             5.00%             42.44%
04/06/09             PDE             5.00%             49.56%
04/13/09             PDE             5.00%             57.04%
04/20/09             PDE             1.80%             59.87%
04/27/09             NKTR             5.00%             67.86%
05/04/09             NKTR             -2.92%             62.96%
05/11/09             PSUN             -10.00%             46.66%
05/18/09             SONS             5.00%             54.00%
05/25/09             SONS             5.00%             61.70%
06/01/09             CENTA             5.00%             69.78%
06/08/09             CENTA             5.00%             78.27%
06/15/09             CENTA             5.00%             87.18%
06/22/09             CENTA             5.00%             96.54%
06/29/09             GOL             -10.00%             76.89%
07/06/09             TSL             -10.00%             59.20%
07/13/09             TRW             5.00%             67.16%
07/20/09             CSE             5.00%             75.52%
07/27/09             FUQI             5.00%             84.29%
08/03/09             FUQI             5.00%             93.51%
08/10/09             FUQI             5.00%             103.18%
08/17/09             FUQI             5.00%             113.34%
08/24/09             FUQI             5.00%             124.01%
08/31/09             FUQI             5.00%             135.21%
09/08/09             FUQI             5.00%             146.97%
09/14/09             FUQI             5.00%             159.32%
09/21/09             MED             5.00%             172.28%
09/28/09             YRCW             -10.00%             145.06%
10/05/09             MED             5.00%             157.31%
10/12/09             BZ             -10.00%             131.58%

Not near the theoretical return of 1.05^52 = 1164% per annum, but not too shabby. Not too many portfolios up this much over the past 12 months.

Thoughts and comments are encouraged.

Kevin

durgin
60 posts
msg #81146
Ignore durgin
10/15/2009 5:37:01 PM

Bravo Kevin -- this is excellent!

I'm thinking that if I were to use this I would have the 10% stop loss but not a 5% profit stop. I would check on a weekly basis and sell any stock not in the top five of the list.

One of the problems I have is that my account is an IRA and when I sell I can't use the funds for three days until the sale clears. Obviously this is a factor when you're turning around stocks every week.

Thank you!

Kevin_in_GA
3,964 posts
msg #81147
Ignore Kevin_in_GA
10/15/2009 5:42:56 PM

Durgin:
I also trade within a restricted account with a 3-day settlement. What I noticed is that in the majority of the cases seen in the backtest I posted, the target or stop loss was hit within 2 days. That would allow for the 3 day settlement.

Kevin_in_GA
3,964 posts
msg #81153
Ignore Kevin_in_GA
10/15/2009 7:00:02 PM

Durgin:

I think it is important to recognize that this filter does not determine if a stock will run higher for any period of time longer than a week. It only selects stocks with good range from the open to the high. That's all.

The design is predicated on selling by week's end - no promises if you carry the trade over the weekend (or even past the point where it hits 5%).

I would caution you (or anyone) to expect a filter's performance to extend beyond what it was designed to do.

tmanbone
124 posts
msg #81163
Ignore tmanbone
10/15/2009 7:58:29 PM

Nice work Kevin.

jnafach
74 posts
msg #81176
Ignore jnafach
10/15/2009 10:47:14 PM

I am not sure how running this but even for example Nv 3 the winner is SKFand not SRS

Kevin_in_GA
3,964 posts
msg #81191
Ignore Kevin_in_GA
10/16/2009 7:46:56 AM

Please remember that to check for the week of 11/3, you must use the data from 10/31 (the friday before) since that is the weekend data. any data from 11/3 includes the results from the close on 11/3 which would skew the data.

I get the following for 10/31:

9 results from: Friday October 31, 2008
Symbol Last Chg(%) Vol performance reward risk 4 wk reward 4 wk risk 13 wk reward 13 wk risk Since(%) Analysis Chart
SMN - UltraShort Basic Ma... 70.20 -2.90 4975400 1.66 3.00 1.81 4.00 3.00 13.00 4.00 -86.47 historical 3m , 6m , 1y , 2y
SKF - UltraShort Financia... 124.38 -9.36 18375800 2.24 2.92 1.31 4.00 2.00 12.00 4.00 -81.69 historical 3m , 6m , 1y , 2y
SRS - UltraShort Real Est... 115.47 -12.37 4935400 2.24 2.92 1.31 4.00 2.00 12.00 4.00

Actually looks like SMN is the winner, since it has the highest reward score (which is the first selection criterion). Looking at the charts, the result is no different - still hits the 5% gain without breaking a sweat.



Kevin_in_GA
3,964 posts
msg #81342
Ignore Kevin_in_GA
10/18/2009 1:39:49 PM

THE TOP 3 FOR THIS WEEK:

CNO: REWARD IS 3.00, RISK IS 1.31 (R/R = 2.29)

MED: REWARD IS 3.00, RISK IS 0.15 (R/R = 19.50)

KFN: REWARD IS 3.00, RISK IS 0.65 (R/R = 4.59)

NOTE:
These are the only stocks rated a 3.00 this week. There were 7 last week.

Last week's top 3 choices (BZ, FCH, MED) did not do all that well - only MED hit its 5% target (and just barely - it's weekly high was exactly 5% from its open, which means if you had any slippage in your buy order, the 5% target was not filled).

Good luck to all.

Kevin



durgin
60 posts
msg #81346
Ignore durgin
10/18/2009 3:16:11 PM

Hi Kevin

In the first message, you say that the theoretical return = 1164% per annum. I'm wondering how one figures that out -- a calculation or a table???

Kevin_in_GA
3,964 posts
msg #81349
Ignore Kevin_in_GA
10/18/2009 3:53:43 PM

calculation: 1.05 raised to the 52nd power.

1.05^52 = 12.643 or 1264.3%. Subtract out your original 100% investment and there you go.

StockFetcher Forums · Filter Exchange · 5% A WEEK FILTER (BASED ON TRO'S CROCK POT)<< 1 2 3 4 5 ... 27 >>Post Follow-up

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