This entry was posted on Tuesday, March 9th, 2010 at 10:28 pm and is filed under Stock Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Stock trading strategy?
I’m looking for robot-like trading strategies.
Example: Compare the list of stocks on Investors Business Daily TOP 100 list each week. Select stocks which were added in the current week. Buy 100 shares. Sell if 1) it hits a 10% trailing stop, 2) it falls off the Top 100 list, or 3) after 2 months whether it is up or down.
How can I back test this strategy? How does it compare with other mindless systems? If it can be improved, what changes do you suggest?
While I agree with others here that the plan you talk about will not work in any scenarios except a Bull market like 1999-early 2000, you can surely modify your strategy.
At least you are thinking of sticking to a strategy, most folks do not have one and do not stick to one.
What you should do is get educated in Technical analysis ( TA), one you do that there are lots of specialised techniques ( Elliot wave/ Gann )etc. But these basic TA.
I would say Candlestick charting and pattern recognition is good to start .
Then you will know the basic stuff like moving avg’s , cup and handle, head and shoulders etc. Then go for the specialised techniques, settle on one and develop a strategy and start using it.
you can try Meta stock, tradestation, esignal etc, where you can easily backtest.
I like the following websites: realmoney.com, minyanville.com, bigtrends.com, schafferresearch.com etc etc. Most have free trail periods, use all the free stuff before you pay for anything.
There is no shortage of strategies and techniques and not one of them is perfect. Go through them all and you will like some more than others.
BUT MOST IMPORTANT:
Do not forget to read books on discipline in trading by Alexander Elder,Ari Kiev etc.
If you have a strategy and discipline , and stick to it, then thats it.
Also be flexible, what works in one kinda market does not work in another.
4 Responses to “Stock trading strategy?”
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March 10th, 2010 at 4:15 am
Try a book, ‘Short Swing Trading’
References :
http://daytradeprofits.blogspot.com/
March 10th, 2010 at 5:01 am
First off it can be improved by forgetting about it. There is no trick or gimmick to make money in the stock market. If you do something like this and it works, then it is temporary and very lucky. The trouble will be knowing when to quit and when your strategy is no longer working. A few bad quarters could wipe out any previous successes since you’re dealing with a rather generous 10% stop and you’ll likely only be seeing 1 to 5 percent increases in two months. If you have lot of 3 percent gainers, and half as many 6% losers then you’re at zero, minus paid out commissions.
If you want to back test it find out when the previous 500-1500 stocks were added and then find the stock price for that day. Find each stock price 2 months later. Assume $1000 in each company. If it is worth less than 90% of what you paid then take the 10% loss and no more since you would have the stop limit set-up. Factor in all losses up to 10%. Then add up all the profitable stocks after two months. You can check the list too see which stocks where dropped and adjust your total appropriately, but if you just check and see that it is on the list 2 months later then no need. Out of those 500-1500 companies you would have started with $1000 in each company so 500,000 to 1,500,000. If you have more than a 2% percent gain on your money then it is possibly a successful strategy.
Do you understand what I mean ?
Anyway, I highly doubt this will prove to be a workable strategy, you also need to factor in short term capital gains and trading commissions, which can get expensive depending on how much money you are dealing with.
References :
March 10th, 2010 at 5:44 am
Michaeld is spot on. Robot trading strategies do not work in the long run. The reason is because robots don’t trade. People trade. And people have emotions.
If you want to get a better feel for how the trading game is actually played, check out
http://www.nobsdaytrading.com
References :
March 10th, 2010 at 6:27 am
While I agree with others here that the plan you talk about will not work in any scenarios except a Bull market like 1999-early 2000, you can surely modify your strategy.
At least you are thinking of sticking to a strategy, most folks do not have one and do not stick to one.
What you should do is get educated in Technical analysis ( TA), one you do that there are lots of specialised techniques ( Elliot wave/ Gann )etc. But these basic TA.
I would say Candlestick charting and pattern recognition is good to start .
Then you will know the basic stuff like moving avg’s , cup and handle, head and shoulders etc. Then go for the specialised techniques, settle on one and develop a strategy and start using it.
you can try Meta stock, tradestation, esignal etc, where you can easily backtest.
I like the following websites: realmoney.com, minyanville.com, bigtrends.com, schafferresearch.com etc etc. Most have free trail periods, use all the free stuff before you pay for anything.
There is no shortage of strategies and techniques and not one of them is perfect. Go through them all and you will like some more than others.
BUT MOST IMPORTANT:
Do not forget to read books on discipline in trading by Alexander Elder,Ari Kiev etc.
If you have a strategy and discipline , and stick to it, then thats it.
Also be flexible, what works in one kinda market does not work in another.
References :