Sorry about that last post... shot off before I was finished!
Q: Do you change the components daily?
A: Yes, I build the basket the night before.
Q: Do you/others hold overnight?
A: I get flat each day. Build a new list, every month there are a few repeat names, last month it was NEW FMT, for example.
Q: Do you select the components using a 'chart reading' approach or a more mechanical/statistical way?
A: 23 statistical screens. I take a look at the individual charts once I have my list for the next day. Cull takeover/merger arb names, etc.
The methodology is based on my experience, it is a never ending adjustment process, constantly tweaking it.
For example a stop loss toolkit is my focus now, I normally place a 3/4% to 1% stop on all my fills, lately with the volatility I've gotten taken out of winning trades. I am adjusting based on the VIX, wider the higher the VIX, tighter the lower the reading.
This method works best for me, if the market opens up I pay more for my longs, and receive a higher price for my shorts; if the market opens down, I get a lower price for my shorts, and a lower price for my longs.
I start out dollar neutral MOO and most days let the market get me net long or short by triggering my stops, then exit MOC or close them all out prior to the close manually.
