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Kevin_in_GA 4,599 posts msg #91424 - Ignore Kevin_in_GA	4/20/2010 7:25:23 AM Not sure why ... (5% + 5% + 5% + 5% - 10%) / 5 = 2% per week. 104% per annum, without any compounding. How is this bad?
LebowskiUrbanAchievers 56 posts msg #91425 - Ignore LebowskiUrbanAchievers	4/20/2010 8:03:31 AM MTG falls on news of common and prefferred stock sale. Already down to 11% this AM. I am getting stopped out.
sbuck143 88 posts msg #91426 - Ignore sbuck143	4/20/2010 9:06:58 AM hmsb4494 - Ignore hmsb4494 4/19/2010 10:30:55 PM yeah in my VERY modest account a 4/5 (80%) win rate gives a VERY,VERY modest profit. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ This has everything to do with your position sizing, and nothing to do with the trading system itself. With a winning percentage of 80%, and a reward to risk of 0.5, the expectancy of the system is (as Kevin alludes) is 2% per trade. This is an inherently profitable system, but it takes a keen mind to realize this is only half (and probably less than half) of the equation to make you money....the other factors are money mgmt and the ability to pyschologically withstand extended drawdowns. Take for example a $5000 account that starts out with $500 on each position. Trade 1. 5% win = $25 profit, acct value: $5025 Trade 2. 5% win = $25 profit, acct value: $5050 Trade 3. 5% win = $25 profit, acct value: $5075 Trade 4. 5% win = $25 profit, acct value: $5100 System is looking good, but so far after a month, you're only up $100 (before commissions). YOu've decided its the real deal, so you throw more money at it. For Trade 5, you put $2500 in the play, and you know what's comign next... Trade 5, 10% LOSS = $250 loss, acct value: $4850 Trade 6, you keep the same position size, wanting to make up that loss. You figure the 80% system already had its one bad week out of 4. Trade 6, 10% LOSS = $250 loss, acct value $4600. You learn the error of your ways and go back to $500 on each position. Trade 7. 5% win = $25 profit, acct value: $4625 Trade 8. 5% win = $25 profit, acct value: $4650 Trade 9. 5% win = $25 profit, acct value: $4675 Trade 10. 5% win = $25 profit, acct value: $4700 So at the end of 10 weeks, through nothing else than position sizing mistakes, driven mostly by greed and the lack of proper money mgmt, you are looking at a [b]6% loss.[/b] Now lets contrast this to a strategy using consistent money mgmt: If you kept the $500 position throughout, your account value at the end of 10 weeks is $5100....which exactly fits the expectancy of 2% on your $500 risk over 10 weeks.
Kevin_in_GA 4,599 posts msg #91432 - Ignore Kevin_in_GA	4/20/2010 12:04:42 PM To build further off of the above, one should see this filter as a means to idenitify stocks with a statistical edge - feel free to change the stop loss to 5% or less. Also, given that these are shooting for 5% per week, you could be happy with 4% (knowing that you are more even more likely to hit that target). My backtesting was on only the top ranked stock - one bet per week. I used a 10% stop loss because of the unusually bad period of the intial backtest (late 2008 and early 2009), and the consistent selection of 2x inverse leveraged ETFs during that period (SKF, SDS, SMN) which needed some breathing room.
ciscoslaves 5 posts msg #91433 - Ignore ciscoslaves	4/20/2010 12:07:08 PM Hi, been following the thread occasionally. I like this general concept, although I think two things here could be improved: #1 timing #2 adjusting for general market conditions #1 - I mean, instead of buying early monday morning, what about waiting for some sort of momentum indicator to turn bullish? Perhaps using the slow stoch. #2 - The last 60 weeks or so has been one of the greatest rally's we have ever seen, and now that volality is gone, one might think to adjust the 5%/-10% to something like 4%/-4%. Thoughts?
sbuck143 88 posts msg #91434 - Ignore sbuck143	4/20/2010 1:21:30 PM ciscoslaves - Ignore ciscoslaves 4/20/2010 12:07:08 PM Hi, been following the thread occasionally. I like this general concept, although I think two things here could be improved: #1 timing #2 adjusting for general market conditions #1 - I mean, instead of buying early monday morning, what about waiting for some sort of momentum indicator to turn bullish? Perhaps using the slow stoch. #2 - The last 60 weeks or so has been one of the greatest rally's we have ever seen, and now that volality is gone, one might think to adjust the 5%/-10% to something like 4%/-4%. Thoughts? ======================================================================= The thing with buying early monday morning is that the set up, the criteria that put a stock on the list are based all off that reference price of Monday mornings open. If you buy at any other time, regardless of how 'good' you think you've refined it, you've officially moved outside the bounds and parameters of the system and the statistics are invalidated. In other words, the 5% up range could be hit while waiting for your slow stoch to confirm the move. You get in, only to watch it drift back down. Now what you might could do is add something to the criteria selection process, say ADX above a certain level , or maybe DI+ has to be higher than DI- by a certain amount, but that might filter out too many stocks.
hmsb4494 81 posts msg #91444 - Ignore hmsb4494	4/20/2010 6:32:43 PM Kevin_in_GA - Ignore Kevin_in_GA 4/20/2010 7:25:23 AM Not sure why ... (5% + 5% + 5% + 5% - 10%) / 5 = 2% per week. 104% per annum, without any compounding. How is this bad? ------------------------------ refigure the above on a $1000 account with $6.00 round trip comm.
Kevin_in_GA 4,599 posts msg #91449 - Ignore Kevin_in_GA	4/20/2010 7:30:44 PM The solution is not to trade 10 separate stocks on only $1000. Trade only the top stock, as I showed in the first post.
hmsb4494 81 posts msg #91450 - Ignore hmsb4494 modified	4/20/2010 8:04:00 PM Kevin_in_GA - Ignore Kevin_in_GA 4/20/2010 7:30:44 PM The solution is not to trade 10 separate stocks on only $1000. Trade only the top stock, as I showed in the first post. ------------------- 1000+5%=1050-6=1044 1044+5%=1096-6=1090 1090+5%=1144-6=1138 1138+5%=1195-6=1189 1189-10%=1070-6=1064 and thats at 80% win rate falls off fast less that 80%
Eman93 4,750 posts msg #91452 - Ignore Eman93 modified	4/20/2010 8:23:20 PM You need to let your winners run past the 5%... I will run this in my paper account... I will use 5k per trade and trade the top 2 picks or the charts I like at the open on Monday.... I will give reasons why I like one chart over the other. I will manage the trade trying for more than 5%...... this will help me and everyone interested in this method... I will go for at least 6 months.. Kevin you post the list and I will trade it and post the results. I really need to work on my trading skills.....because I really suck at it. What do you say Kevin? We all could do it and let the best trader win......? Every one who is in sends the winner a case of beer? You must declare by This Sunday night.... Who's in? Rules must use any stock this filter prints on Sunday night.... pick any one....

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