Full disclosure - this is the first trade of an experimental new trading setup I stumbled upon while investigating something else. That happens a lot to me, actually. I wouldn't recommend following me with real money on it due to its limited backtesting at the moment, but the early results have been tantalizing.
This one is an almost entirely quantitative approach, so I don't have anything juicy to tempt anyone with anyway, other than the backtest results shown here. There's nothing technically exciting about this stock either, except that it is in a strong uptrend since the beginning of the year.
It's down since its IPO and has largely just oscillated sideways for the last 4 years (which is actually a plus for me). It is above its 200d MA and that seems to add a slight edge to this approach, but mostly in terms of not entering during long downtrends, which I try to stay away from anyway unless grinding something I already own.
My lot rules are a little different than usual, though. Like all my new things, I use smaller lots while testing. I think I will regret that here, but discipline is important. The fact that a lot these trades fairly align with my mean reversion system makes me a little more comfortable. I am also limiting my exposure to 5 lots open at a time.
What this system does, however, is twofold.
1- it is a much simpler system for me to screen than some of the other things I do. that matters to me when I am screening a LOT of stocks daily.
2 - I get more trades that pay almost as well. As you know, I am a big fan of using small portions of my portfolio to do a lot of heavy lifting, in order to get stock like returns from bond-like portfolio volatility (better than bond-level lately). To do that, the money I have working needs to stay busy. This system uses volatility to keep this segment of my money busy and highly productive.
It is also becoming clear to me that volatility is the heartbeat of how I make money trading. It makes me money faster, and more importantly, it recovers from losses quicker.
One of my all-time worst trades (which I am currently bag holding 3 lots of) is CPB. Not only has that stock shown absolutely no fight in its downtrend, its lack of volatility means it will likely take an equal, if not longer time to recover than I've already owned it for. Trades like that are a risk of how I work, but I limit their drag by limiting how much money I will allocate to them. It's paying a nice dividend for now, so that helps.
But while volatility can cause fast losses, it also provides fast recovery. And when a trading system produces north of 90% wins, the volatility in other stocks' wins more easily cancels out the losses of losers.
So my limit on this position will be 5 lots. That number was initially chosen by instinct, but one honed from doing a LOT of these trades. Short term downtrends rarely go 5 days without some sort of upward bounce, if only for a day or two. Using a 5 lot limit (of smaller than normal lots), keeps risk within my parameters while giving those last 2 lots the ability to more often than not keep working while the others are waiting to clear. See the work lots 4 and 5 did from mid-Dec to mid-Feb on the chart.
I am still using a target, combined with FPC as a backup. In this case the target is a quick 2.5%. Option 2 is FPC if it doesn't hit that number.
As you can see, this method gets my money back to work quickly. The average trade here lasted 6 trading days, but 70% of them lasted only 1 or 2 days. Whether they lasted 1 day or 67, that ADR (average daily return) was well above market average, often 50-100x it, for 36 of the 37 trades.
That is not NEXT's or this time period's selection bias, that is a pretty standard result in my backtesting. So long as the stock doesn't absolutely tank, I will likely have a far better than market average daily return.
And if it does tank, its volatility combined with tactical adding and subtracting along the way will allow me to get back to even faster than the stock.
There is one Achilles' heel to this, and it bears mentioning - if you get 5 lots in and it just keeps going down, you are stuck. I don't use stop losses. What I feel needs to be stressed here for those who might be tempted to follow me based on past results is this - diversification is what mitigates this risk for me.
This is neither a large dollar amount trade for me, nor a significant portion of my risk portfolio. If this trade tanks, I will have 20 or more others going in different sectors that will likely have pretty low correlation to this. So if these lots are losing 30%, I will simultaneously have 20 or 30 others whose positive 0.25-0.75% avg long term daily returns will likely be offsetting this one. That is how I get bond level portfolio volatility. Be right WAY more often than not, make significantly more per day invested than the market (on average), have good trades mitigate the drops in bad ones, and get that money back to work as soon as it pays.
I can't stress this enough - this trade is NOT a get rich quick scheme. It is a small part of a larger strategy. Putting too many eggs into one basket when trading is the easiest way to get your head handed to you and have to spend tons of time rebuilding your capital pool. I know - I did that early on in my trading life. Not a great plan - do not recommend. Many small trades that pay a lot and better than the market average is a way safer strategy than big bets on what seem like sure things.
As always - this is intended as "edutainment" and my perspective on what I am or would be doing, not a recommendation for you to buy or sell. Act accordingly and invest at your own risk. DYOR and only make investments that make good financial sense for you in your current situation.
And I'm not cheating with that entry price, it just took a while to write this. It's at 8.73 as I publish. I also just realized I misplaced the yellow line at 8.70 instead of 8.67, so if you want to hold me to 8.70, I'm fine with that. I have to delete the whole idea and repost it to fix that, and I am not doing that. I'd rather sacrifice the .03
This one is an almost entirely quantitative approach, so I don't have anything juicy to tempt anyone with anyway, other than the backtest results shown here. There's nothing technically exciting about this stock either, except that it is in a strong uptrend since the beginning of the year.
It's down since its IPO and has largely just oscillated sideways for the last 4 years (which is actually a plus for me). It is above its 200d MA and that seems to add a slight edge to this approach, but mostly in terms of not entering during long downtrends, which I try to stay away from anyway unless grinding something I already own.
My lot rules are a little different than usual, though. Like all my new things, I use smaller lots while testing. I think I will regret that here, but discipline is important. The fact that a lot these trades fairly align with my mean reversion system makes me a little more comfortable. I am also limiting my exposure to 5 lots open at a time.
What this system does, however, is twofold.
1- it is a much simpler system for me to screen than some of the other things I do. that matters to me when I am screening a LOT of stocks daily.
2 - I get more trades that pay almost as well. As you know, I am a big fan of using small portions of my portfolio to do a lot of heavy lifting, in order to get stock like returns from bond-like portfolio volatility (better than bond-level lately). To do that, the money I have working needs to stay busy. This system uses volatility to keep this segment of my money busy and highly productive.
It is also becoming clear to me that volatility is the heartbeat of how I make money trading. It makes me money faster, and more importantly, it recovers from losses quicker.
One of my all-time worst trades (which I am currently bag holding 3 lots of) is CPB. Not only has that stock shown absolutely no fight in its downtrend, its lack of volatility means it will likely take an equal, if not longer time to recover than I've already owned it for. Trades like that are a risk of how I work, but I limit their drag by limiting how much money I will allocate to them. It's paying a nice dividend for now, so that helps.
But while volatility can cause fast losses, it also provides fast recovery. And when a trading system produces north of 90% wins, the volatility in other stocks' wins more easily cancels out the losses of losers.
So my limit on this position will be 5 lots. That number was initially chosen by instinct, but one honed from doing a LOT of these trades. Short term downtrends rarely go 5 days without some sort of upward bounce, if only for a day or two. Using a 5 lot limit (of smaller than normal lots), keeps risk within my parameters while giving those last 2 lots the ability to more often than not keep working while the others are waiting to clear. See the work lots 4 and 5 did from mid-Dec to mid-Feb on the chart.
I am still using a target, combined with FPC as a backup. In this case the target is a quick 2.5%. Option 2 is FPC if it doesn't hit that number.
As you can see, this method gets my money back to work quickly. The average trade here lasted 6 trading days, but 70% of them lasted only 1 or 2 days. Whether they lasted 1 day or 67, that ADR (average daily return) was well above market average, often 50-100x it, for 36 of the 37 trades.
That is not NEXT's or this time period's selection bias, that is a pretty standard result in my backtesting. So long as the stock doesn't absolutely tank, I will likely have a far better than market average daily return.
And if it does tank, its volatility combined with tactical adding and subtracting along the way will allow me to get back to even faster than the stock.
There is one Achilles' heel to this, and it bears mentioning - if you get 5 lots in and it just keeps going down, you are stuck. I don't use stop losses. What I feel needs to be stressed here for those who might be tempted to follow me based on past results is this - diversification is what mitigates this risk for me.
This is neither a large dollar amount trade for me, nor a significant portion of my risk portfolio. If this trade tanks, I will have 20 or more others going in different sectors that will likely have pretty low correlation to this. So if these lots are losing 30%, I will simultaneously have 20 or 30 others whose positive 0.25-0.75% avg long term daily returns will likely be offsetting this one. That is how I get bond level portfolio volatility. Be right WAY more often than not, make significantly more per day invested than the market (on average), have good trades mitigate the drops in bad ones, and get that money back to work as soon as it pays.
I can't stress this enough - this trade is NOT a get rich quick scheme. It is a small part of a larger strategy. Putting too many eggs into one basket when trading is the easiest way to get your head handed to you and have to spend tons of time rebuilding your capital pool. I know - I did that early on in my trading life. Not a great plan - do not recommend. Many small trades that pay a lot and better than the market average is a way safer strategy than big bets on what seem like sure things.
As always - this is intended as "edutainment" and my perspective on what I am or would be doing, not a recommendation for you to buy or sell. Act accordingly and invest at your own risk. DYOR and only make investments that make good financial sense for you in your current situation.
And I'm not cheating with that entry price, it just took a while to write this. It's at 8.73 as I publish. I also just realized I misplaced the yellow line at 8.70 instead of 8.67, so if you want to hold me to 8.70, I'm fine with that. I have to delete the whole idea and repost it to fix that, and I am not doing that. I'd rather sacrifice the .03
Anmerkung
added another mini-lot at 8.44 just before the close.Lots held
Lot 1 - 8.67
Lot 2 - 8.44
Anmerkung
fyi, "mini-lot" = lot size for this idea for all trades. smaller than my normal trade lots, but I always trade the same amount per lot within any particular idea.Anmerkung
I think I will regret doing so, but I sold lot 2 just before the close for 8.46 - a +0.24% gain in 1 trading day. It feels like such a disappointing trade, but then I realized that's almost 6x the average daily market return and I feel a little better about it. Not that much, though. I wanted a juicier win. Oh well. Next time. Lots held
Lot 1 - 8.67
Anmerkung
I'm not regretting selling that lot for 8.46 on Friday as much as I was then. I bought it back today at the close for 8.37. Between the .24% gain booked and the 1.08% gain needed to get back to that 8.46 level from here, I saved myself 1.32%. That's a great 2 day trade here and why I (almost always) follow my rules - it prevents me from out thinking myself. The market will do what it does, and none of us knows what that will be next. Following my rules means I don't have to. Just being willing to take what the market gives pays over the long haul.Lots held:
Lot 1 - 8.67
Lot 3 - 8.37
Anmerkung
Added lot 4 at the close today for 7.97.Lots held
Lot 1 - 8.67
Lot 2 - 8.37
Lot 3 - 7.97
Anmerkung
Sold lot 4 at the close for 8.05 - a +1.00% gain in 1 trading day. Note: I misnumbered it lot 3 in the previous note. And lot 2 above is really lot 3, I misnumbered that one, too. Lot 2 already got sold last Friday.Lots held
Lot 1 - 8.67
Lot 3 - 8.37
Anmerkung
Added lot 4 at the close for 7.92Lots held
Lot 1 - 8.67
Lot 3 - 8.37
Lot 4 - 7.92
Anmerkung
Lot 4 sold just after the open for 8.17 - a 3.16% gain in 1 trading day. Lot 3 could get taken out today as well.Lots still held
Lot 1 - 8.67
Lot 3 - 8.37
Anmerkung
Just sold lot 3 a few minutes ago for 8.62 because I still have lot 1 to capture any further move to the upside and this one has been acting very poorly at the close for the last couple of days. In a market that feels weak, I'll take the money and run. +2.99% in 6 trading days for lot 3. Not amazing for this stock, but a solid return.Lots held
Lot 1 - 8.67
Anmerkung
Added lot 4 at the close for 8.46.Lots held
Lot 1 - 8.67
Lot 4 = 8.46
Anmerkung
Added lot 5 at the close for 8.13Lots held
Lot 1 - 8.67
Lot 4 - 8.46
Lot 5 - 8.13
Anmerkung
Just sold lot 5 for 8.33. A +2.56% gain in a little over 1 hour of market time. We'll call that 1 day.Lots still held
Lot 1 - 8.67
Lot 4 - 8.46
Anmerkung
Added Lot 6 at the close for 7.735Lots still held
Lot 1 - 8.67
Lot 4 - 8.46
Lot 6 - 7.735
Anmerkung
Sold lot 6 at the close at 7.79 for a +0.71% gain in 1 trading dayLots held
Lot 1 - 8.67
Lot 4 - 8.46
Haftungsausschluss
Die Informationen und Veröffentlichungen sind nicht als Finanz-, Anlage-, Handels- oder andere Arten von Ratschlägen oder Empfehlungen gedacht, die von TradingView bereitgestellt oder gebilligt werden, und stellen diese nicht dar. Lesen Sie mehr in den Nutzungsbedingungen.
Haftungsausschluss
Die Informationen und Veröffentlichungen sind nicht als Finanz-, Anlage-, Handels- oder andere Arten von Ratschlägen oder Empfehlungen gedacht, die von TradingView bereitgestellt oder gebilligt werden, und stellen diese nicht dar. Lesen Sie mehr in den Nutzungsbedingungen.