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54 posts
msg #83108
Ignore crunkle
11/15/2009 7:52:12 PM

Well OK, if you want,

There's really nothing about special about how I trade and, since I can't buy them all, there's no need for secrecy. Fortunately, I'm blessed with a business that's still going in this economy and keeps me pretty active, especially this time of year. Not having to depend on trading profits to put bread on the table keeps the stress level down.

I'm sure you have all heard at least some of this before so I'll try not to get too "preachy".

I gave specific backtest results for one of my scans in my original post. I especially like the low drawdown, high Reward/Risk ratio and the ROI. Here's the scan

RSI(11) crossed above 30
and average volume(30) is greater than 1,000,000
and price is between 8 and 40
and show stocks where market is not ETF
add column RSI(11)

Nothing extraordinary there. I like higher volume, more liquid stocks. The price range is also nothing special. I'm just comfortable in that area. The "show stocks where market is not ETF" line is there to keep out the inverse ETF's that skew backtest results.

In backtesting, I used a 6% stop-loss, no stop-profit and a max holding period of 10 days. My exit trigger was a close below the previous days LOW. Trade period was between 6/30/09 and 10/30/09. You can fiddle around with these if you like. If any changes improve results, please report back.

Keep in mind this is a scan for long positions and (surprise!) will perform better in an up market.

Here's the results:

Approach Information
Approach Name: RSI(11) Crossover 30 (no ETF)
Test started on 06/30/2009 ended on 10/30/2009, covering 86 days
Filter used:
RSI(11) Crossover 30 (no ETF) (saved filter)

Trade Statistics
There were 247 total stocks entered. Of those, 217 or 87.85% were complete and 30 or 12.15% were open.
Of the 217 completed trades, 128 trades or 58.99%resulted in a net gain.
Your average net change for completed trades was: 6.50%.
The average draw down of your approach was: -3.38%.
The average max profit of your approach was: 11.22%
The Reward/Risk ratio for this approach is: 5.30
Annualized Return on Investment (ROI): 245.22%, the ROI of ^SPX was: 33.78%.

Exit Statistics
Stop Loss was triggered 20 times or 9.22% of the time.
Stop Profit was triggered 0 times or 0.00% of the time.
Trailing Stop Loss was triggered 0 times or 0.00% of the time.
You held for the maximum period of time (10 days) 90 times or 41.47% of the time.
An exit trigger was executed 107 times or 49.31% of the time.

I use a variety of scans from RSI(7) crossing above 20 to RSI(13) crossing above 40. Some stocks, big pharma for example are hardly ever below the 40 threshold. If you run these scans and look at the historical charts on your 'hits', it's pretty dramatic how those little green arrows get just about every significant bottom. It's also OK to check what hit in the previous day or two. Sometimes those stocks can still be a good buy.

Scans are the easy part. Deciding what to do with the results requires judgement. Much of what I say now is just personal preference based on experiences, both good and bad. In no particular order:

1) Many of the stocks that show up are bouncing from a gap down. Right or wrong, I tend to leave those alone.

2) On some days, quite a few stocks in the same industry group show up (gold miners for example). Consider substituting an ETF.

3) I really try to avoid opening a position in the first 30 minutes or so, however it can be a great time to sell.

4) It seems that each day has its own time zones or rhythm. On an up day, it's likely you'll see some retracement over lunch hour (we used to call it the 'noon swoon'). Upward movement is likely to resume somewhere around 90 minutes (give or take) before the close. Thats a pretty good time to get a long position on. Same thing, but in reverse (noon balloon) for shorts on the down days..

5) I like to run my scans in the afternoon and have any positions established before the close (see #4). That way, if the stocks open strong the next day, I'm already there. I'm not a conspiracy theorist but it's happened to me many times that a stock showing up on my scans one afternoon is added to some brokerages "buy" list the next morning before the open (Could someone (or some brokerage firm) be frontrunning?, Really?).

6) I've had some successes selling a position in the pre-market for good prices - occasionally within pennies of the days high.

7) Don't trade in a vacuum Part 1. Look at the overall market first. If the market has been up for 6 or 7 days in a row, do you really want to get long?

8) Don't trade in a vacuum Part 2. I think it was Issac Newton that said for every action there's an equal but opposite reaction. If oil is going through the roof do you really want airline stocks? Or if rates are headed higher, do you really need to own a bank stock?

9) Don't trade in a vacuum Part 3. If you have a position that's profitable but not quite what you were looking to get and it's Friday afternoon, it's OK to sell. You can always get back in next week. Ditto for major upcoming announcements (unemployment report, Federal Reverve announcements, etc)

10) If you're staring at every tick, you're over-invested. Lighten up.

11) There's 3 positions; long, short and standing aside. They're all appropriate at certain times.

12) After a profitable week or month, pull out some cash and put it away somewhere not easily retrieved. My wife's purse is the preferred depository at our house.

13) Very Important! I'm suprised I forgot this until now. My best trades have been profitable almost from the moment I got in. If, within a day or so, a trade isn't working like I expected, I'll pull the plug rather than wait for a stop-out.

14) Don't measure yourself trade-by-trade. The goal is continued account equity growth week-over-week or month-over-month.

15) The exit trigger in the scan above is the best I've found so far. However, and its OK to call me a failure on this point, I don't have the stomach to wait it out and I will usually sell a profitable position for somewhere between a 4-5% profit.

16) My biggest failures were holding on to losing positions. I could probably buy a small house (certainly a big boat) with money lost unnecessarily. Fortunately, I'm beyond that now. If there's only one thing you could master, it should be the ability to get out of a bad position as soon as you can.

Probably more than you wanted to hear but it's Sunday and my team played (and lost) Thursday night, so no game today.

Good Luck,

124 posts
msg #83110
Ignore tmanbone
11/15/2009 8:15:17 PM

Thanks for sharing.

4,577 posts
msg #83117
Ignore Eman93
11/15/2009 9:24:00 PM

Thanks Crunkle !!!!

124 posts
msg #83119
Ignore tmanbone
11/15/2009 9:25:09 PM

There should be blog about the most irritating people on CNBC, like:

and perma bull Kudlow
Hollywood Squares of CNBC. Erin has my attention :-)

352 posts
msg #83124
Ignore BarTune1
11/15/2009 9:40:00 PM

Alot of good points made ..... If I run the opposite for a short filter (i.e., RSI(11) crossing below 70) I get one stock ..... DOW ...

Looks like a good short to me but doesnt otherwise show up on my screens because the RSI(2) is too low ....

Looks like it is rolling over on when plotted on my default graphs showing Stochastics (9,5,3) & RSI(2) ...... last time it went above RSI(11) =70 and crossed below it decreased in price 7 of the next 8 trading days ......

14 posts
msg #83177
Ignore cubtrader
11/17/2009 7:58:42 AM

"There should be blog about the most irritating people on CNBC, like:

and perma bull Kudlow"

I havenít watched CNBC in years (during mkt hours) but for any of you who were trading during the late Ď90s, like me, might remember how giddy and excited Maria Bartiromo use to get in the morning during that horrendous bubble. As a contrarian I got so mad with how they (CNBC) would cheerlead and celebrate every day. Of course I was blown out and learned never to short stocks again because they do go parabolic (oil too).

StockFetcher Forums · General Discussion · Theoretical underlying philosophy to trading/investing<< 1 2 3 4 >>Post Follow-up

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