StockFetcher Forums · General Discussion · STOCK SELECTION ( FILTERING ) VS. STOCK TRADING.<< 1 2 3 4 5 >>Post Follow-up
TheRumpledOne
6,358 posts
msg #57763
Ignore TheRumpledOne
12/8/2007 11:43:32 AM

STOCK SELECTION ( FILTERING ) VS. STOCK TRADING.

Selection is NOT the same as trading.

No matter what stock you or your fitler select, you still must trade it.

Trading is timing entries and exit to take profit or minimize/contain loss.

Once you enter a trade, only price matters. NOTHING ELSE MATTERS. Price is what will determine if you can exit with a profit. Price will determine the value of your indicators - NOT THE OTHER WAY AROUND!!

Remember, if you master a trading method and find ONE STOCK that you can use that method on repeatedly, then you are on the profit path.

Backtesting your filter is NOT going to make you any money only TRADING PROFITABLY will. Just when you thought you found the hot filter, the market will HUMBLE YOU, if you don't know how to trade.

If I have typed it once, I have typed it a thousand times:

IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



betyerbottomdollar
169 posts
msg #57765
Ignore betyerbottomdollar
12/8/2007 12:22:20 PM


Before I heard your online interview and found out you're a regular guy who lives in Arizona, I had a very different mental picture of you, TRO.

I was imagining a wrinkled (rumpled, if you will) old man, probably in the 150 - 180 year-old range, living on top of a remote Himalayan mountain in Tibet. Wearing tattered robes and meditating on statistics filters, you freely give sage advice to those who seek wisdom.

The only thing I couldn't figure out was how you connected to the Internet.

davesaint86
142 posts
msg #57766
Ignore davesaint86
12/8/2007 12:23:34 PM

TRO - I'm glad you brought this up today. I've been thinking along the same lines. I use to have a subscription to VectorVest and I backtested and backtestedover and over with my results for different strategies showing up sometimes over 1000% for the year. I was never successful trading for real because I did not know when to pull the trigger on a trade. I stepped back and quit VectorVest and read book after book. When I was able to pull the trigger usually I did make money but I did not know when to exit either and I would gave up decent gains. I started trading again on 1/10/07 of this year. Between 1/10/07 and 2/15/07 I was up 34%. My main strategy was to buy good stocks that tanked 10-20% because they would miss earnings by a penny or two. I guess I was playing the dead-cat bounce. My strategy was to purchase only one stock at a time. I would purchase close to 100% of my cash and purchase this one stock. If the stock tanked some more after I bought it I would purchase more shares based on a formula I created in a spreadsheet using margin. For example every 5% the stock dropped I would purchase "x" amount of shares. They say never to average down but I did and it worked. My goal was to make at least a 2% gain after commissions. My win rate is 75%. My actual average gain so far has been 1.87%. Most of the times I was out of the trade within 3 days. If the fifth day came I would sell my stock and take whatever gain or loss and move on. Tro's stat scan is a great filter to run for using this strategy. These small gains add up quickly. We talk alot about filters on this site which is great. However I think we need to also talk about our strategies and how we actually make money and also talk about our successes and failures. Hopefully we can learn from them. I've loss a ton of money in the past. I feel that I turned the corner.

Davesaint

dbyrt
70 posts
msg #57767
Ignore dbyrt
12/8/2007 12:34:47 PM

Absolutely spot on TRO.

Its easy to get side-tracked in looking for ultimate filters and ultimate stock picks, when what we`re really after, is the ultimate trade..........repeated again and again.

psheridan050
52 posts
msg #57776
Ignore psheridan050
12/8/2007 3:53:06 PM

What about mechanical trading?
Some would say you wouldn't need to know about price at all for mechanical trade as long as you make your filters with the right criteria. For a statistics based filter, if the results tell you that these stocks typically have a 66% chance to go up, with an average gain of 1% would price even matter? Of course you would take something like this with a grain of salt unless you could statistically prove results like this are consistent with an acceptable standard deviation. A filter that for the last 5 years and 3100+ backtested trades (and live trades) picked stocks with price points between $6 and $400 with volume over one million. A TRO’s Gap statistics filter (with the listed modifications).

Using a filter like this you could input the symbols into TradeStation and tell it to buy on the open and sell on the open the next day remaining totally mechanical. Unless something changes I would imagine that you have that 66% on average of making your 1% without ever having to deal with price. Price would only come into play for money management purpose i.e. how much of your funds will go to each symbol. Even then you would only need to know the previous close and from there on its all percentages.

In this example people might think that holding overnight and bad fills etc. would be an issue. In reality with trading like this all that stuff averages itself out. Many times I have seen that bit of randomness work in my favor as much as it works against me. One thing I can say about discretionary trading vs. mechanical is that discretionary appears to be a lot more efficient. Certainly more efficient than the example listed above.

I'm not saying anyone’s opinion or advice is wrong or anything like that, but that there are many different methods out there that work and to each their own. I’m really big into the statistics method and I have to say that TRO and his filters have really helped. But his approach is just different than mine. Anyone else out there use something similar to what I described above? Or something else entirely?


nikoschopen
2,824 posts
msg #57777
Ignore nikoschopen
12/8/2007 4:08:44 PM

Might I also add that it's not price alone that matters in the end but the timing that will ULTIMATELY either make or break ure fat pocketbook. Getting in at the right time is absolutely crucial. How many times have you been right in hindsight, uhm, had you only delayed your entry or gotten in a little sooner? In the former, you prolly caught the falling knife; in the latter, you prolly chased the stock after it took off. If you get in too soon, what often happens is that you'll get stopped out before you can see the light of day. If you get in too late, namely, if you missed the boat altogether, well, there's no point of even talking about it.





TheRumpledOne
6,358 posts
msg #57778
Ignore TheRumpledOne
modified
12/8/2007 4:51:45 PM

niko:

"Trading is timing entries and exit to take profit or minimize/contain loss.

Once you enter a trade, only price matters. NOTHING ELSE MATTERS. Price is what will determine if you can exit with a profit. ..."

Are you agreeing, Niko?



TheRumpledOne
6,358 posts
msg #57779
Ignore TheRumpledOne
12/8/2007 4:54:05 PM

"What about mechanical trading?
Some would say you wouldn't need to know about price at all for mechanical trade as long as you make your filters with the right criteria. For a statistics based filter, if the results tell you that these stocks typically have a 66% chance to go up, with an average gain of 1% would price even matter? "

PRICE IS ALL THAT MATTERS!!



nikoschopen
2,824 posts
msg #57782
Ignore nikoschopen
12/8/2007 5:10:28 PM

Are you agreeing, Niko?

By all means. I have always been a proponent of time and price, but my emphasis lies more on time than price. Having said that, would you mind explaining how a sane trader like ureself, who cares so much about timing the right entry/exit, could enter a trade at an arbitrary point in time like at the day's open?

TheRumpledOne
6,358 posts
msg #57783
Ignore TheRumpledOne
modified
12/8/2007 5:23:54 PM

niko:

You're smarting than that... and so am I...LOL!!! You know you can't just isolate the parts of trading, you have to look at the whole.

You don't just ENTER AT THE OPEN. You first pick a direction to enter and then enter at the proper time.

If AAPL gaps up, then statistics tells me to look for a short at open - .10. I won't short until AAPL goes down.

I would enter long at open + .10 but I would be quick to take my profit or stop out at the open price until AAPL fills the gap.

Image and video hosting by TinyPic

Using my latest STAT filter display, I know that most of the time, I can get a 1% or better return on AAPL but, I should be happy with 1% because, only about 1 out of 4 times will AAPL give me 2% or more.

"could enter a trade at an arbitrary point in time like at the day's open?"

I would think that the OPEN is the least arbitrary of all points in time simply because it IS the open.

10:37 AM EST would be an ARBITRARY point unless you knew something else about that particular time.





StockFetcher Forums · General Discussion · STOCK SELECTION ( FILTERING ) VS. STOCK TRADING.<< 1 2 3 4 5 >>Post Follow-up

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