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64 posts
msg #115949
Ignore olathegolf
10/15/2013 6:22:55 PM

Oldsmar52: Again, congratulations on your success. Your input is very much appreciated but I'm sure you understand wanting to verify through backtesting. Nobody can deny the win percentages - even at a quick glance, it is apparent. However, when somebody says they've been using this system for 5 years without a loss with multiple entries per week - of course it is hard to believe - and certainly appropriate to verify.

frsrblch: I used your filter because it typically provides 5-10 selections per week and it's easier to download the weekly CSV file and analyze. It's a tweak of TRO's original filter but not different enough for my backtest.

frsrblch: From my simple backtest, I cannot tell the day the 2% profit stop was triggered. As I said, 171 of 195 were triggered the same week. Twenty were triggered within a few weeks (as Frank suggested). However, 4 remain open.

novacane32000: I can't derive the drawdown easily from my simple backtest - looking at weekly open, high, low, close.

So, don't think I'm disrespecting the TRO filter (or any variation thereof). I think this is probably one of the best filters I've seen; however, in my opinion, an exit strategy should be considered for the scenario when a stock drops and looks like it will never recover. You should know what you're going to do before hand. Is the strategy to simply hold the stock believing it will trigger at some point. My backtest (so far) says you'd be right 20 out of 24 times right now. But you have to ask yourself what you would do if you were holding a couple stocks that were 20%, 30%, the hole.

Certainly, the total win percentages in my brief analysis (342%) seems robust enough to handle some fairly heavy losses. Nonetheless, it's prudent to consider exit strategies.

268 posts
msg #115951
Ignore novacane32000
10/15/2013 6:48:19 PM

I believe the only way to never lose is to never sell until you have a profit...baraboom!! and the only way to do that is something like this.

You buy 100 shares of ABC stock and it drops 10% . You buy 100 more shares and it then goes up 2% and you sell the 100 and you are still holding the original 100.
If it does not go up 2% after droping 10% and drops another 10% (you now have a 20% drop) you will need to buy 100 more (You now own 300 shares) and you wait for that 2% pop. You will need to recoup all your losses before being able to sell all your shares.

So in summary-If you get the 2% pop great-your out . If not you buy again on 10% drops and sell your last lot when it has a 2% pop.

The problem is you will always need lots of money in reserve to buy for the inevitable 10% drops. You will probably have more money in reserve than in actual use when using this method but you will never lose.

60 posts
msg #115965
Ignore durgin
10/16/2013 1:34:23 PM


You have put into stark contrast those who develop trading systems and those who implement them. Most of us are somewhere along that continuum but you're on the implementing end. One can only hope that TRO has done half as well as you have done over the past 5 years. Thanks for the lesson -- I wish you all the best!

3,879 posts
msg #115972
Ignore Kevin_in_GA
10/16/2013 2:40:46 PM

There is an exit strategy in place - it is called the Friday close.

Holding out for more than a 2% goal, or holding beyond the Friday close, invalidates the statistics upon which the strategy is based. As TRO says, "It's not what you trade, it's how you trade it." You can change this approach if you want, but you do so at your own risk.

35 posts
msg #115973
Ignore frsrblch
10/16/2013 2:49:32 PM

As you said, novacane, holding requires you to either keep a large reserve of cash to keep buying new stocks each week, or for you to limit the number of new buys you can make each week. Holding indefinitely is not something I'm comfortable with; the system was designed around finding stocks with a good probability of giving a small return in the span of a week, not finding stocks where you want to park your money waiting for a turnaround. With that in mind, I set two weeks as a arbitrary length of time to hold on to a stock after it missed its 2% target (for a maximum hold time of 3 weeks) and did some testing based on this.

The portfolio size was 5, and the testing was done back through the week of Dec 31, 2012. If a trade was not profitable, it was held for up to an additional two weeks, keeping the original stop of 2%. If a stock was held longer than one week, one fewer trades were entered on the next week, so that there were five positions open at the start of each week (you could do it differently, but I decided to test it that way). I'll spare you the full details, but the annualized return of this system was 79%, compared with only 52% when losing trades were sold on the first Friday. On average, each week was more consistent (lower standard deviation), and more profitable (1.13% per week vs 0.82%).

24 posts
msg #115980
Ignore shainadir
10/16/2013 6:22:41 PM


Was this backtest done using the 13 week filter you listed on 10/14/13? Thanks.

35 posts
msg #115983
Ignore frsrblch
10/16/2013 7:48:17 PM

It was with the filter I posted on page 2, which was a simple 52-week version built for easier backtesting.

64 posts
msg #115989
Ignore olathegolf
10/16/2013 10:54:23 PM

Edited to clean up table format............
Certainly exiting at the close on Friday matches TRO's original filter. No argument there. However, the comment about exit strategy is meant for those carrying a stock beyond the first week.
Using the frsrblch filter, I backtested from 1/4/13 to 10/4/13. I removed all 2X and 3X ETFs - personal preference but you can leave them if you wish.

I set the following parameters:
1. Enter all positions from the filter @ $5,000/trade or $10,000/trade (see below)
2. Cost per trade is $8.95 each side
3. Target win % is variable - see below.
4. Close out trade @Friday's close if target win% not triggered

                                                                     $5K/Trade $10K/Trade
Target% Entries Wins Win% TotGain% TotGain$ Tot Gain $
1                    318   290 91.2% 156.0%    $2,106     $9,905
2                    318   264 83.0% 286.2%    $8,616     $22,924
3                    318   235 73.9% 334.2%    $11,016   $27,723
4                    318   214 67.3% 457.0%    $17,158   $40,008
5                    318   192 60.4% 524.3%    $20,523   $46,739
6                    318   174 54.7% 594.4%    $24,028   $53,748
7                    318   151 47.5% 598.5%    $24,235   $54,161
8                    318   135 42.5% 646.1%    $26,611   $58,913
9                    318   119 37.4% 670.6%    $27,839   $61,371
10                  318   105 33.0% 683.6%    $28,490   $62,672
15                  318   49     15.4% 670.5%   $27,832   $61,356
20                  318   31     9.7% 685.4%     $28,578   $62,848
10000           318     0      0.0% 638.2%    $26,217   $58,126

Total Gain % does not include trade costs
Win % is does not include trade costs
40 weeks of trading - averages about 8 trades per week.
Average gain per trade ranges from about 0.5% to 2%.

It will be interesting to see the longer term results in down markets like late 2008 - early 2009. Note the correlation between target %, win %, and total gain.

99 posts
msg #116011
Ignore jimmyjazz
10/17/2013 1:20:19 PM

I'm not following. (Surprise, surprise.)

If you average 8 trades per week, then you're roughly investing $40K (in the $5K trade column). You made $2,106 during that timeframe on the 1% stop? How does that correlate to 156%? And why aren't the $10K/trade gains = 2X the $5K/trade gains?

642 posts
msg #116012
Ignore mahkoh
10/17/2013 1:25:13 PM

TRO seems to be prepping for SHTF. Question is will we wish to have followed his advice five years from now again?

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