buying the highs

[jbusse]

Or used to work. That paper uses data ending in 2001!

Good point. I've been trained to cite the seminal paper. A follow-up paper that documents a similar pattern based on more recent data is:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2500335

 

[777]

Your strat sounds so easy to test, just go and test it instead of asking for random opinions

I think asking opinions and testing is the way to go...

Asking good question sometimes turns up good ideas.

But definitely test!

 

[777]

I think it is the illiquid stocks that will perform the best with this strategy. For the reason of slower information flow.

Try to find a way to backtest and look for the reasons!!!

Many things sound reasonable when presented well. Some work and some do not.

Also, some edges end... like following a short seller in low volume stocks.

Others never worked in low volume stocks because of spread/liquidity.

On a higher level, the big boys like Renaissance Technologies and Dalio test, test, test.
_____

1. Test

2. Scour the literature

3, Develop relationships with people who have successfully done what you want to do-- and preferably still are!

Sometimes number 3 is enough but it is often very hard to do.

 

[777]

On a cautionary note:

The Candy Store Usually Closes

Most big edges end faster and faster because of technologIcal progress and quicker information flow.

Years ago Shoenfeld Securities was the largest prop firm. They self cleared and put up all the money for their traders.

For years their basic method, a well researched and successful manual daytrading method was:

Buy extreme green and sell extreme red.



Advanced traders could carry overnight and for years their traders did not even have level 2.

Then they brought in a highly successful scalper to teach his relatively simple method.

The firm is still highly successful but after a good number of years they fired the buy the green and sell the red mo mo players as well as shut down their scalpers because their manual trading version of those simple things had stopped working

The firm adapted and now does other things.

 

[murray t turtle]

That's a very good point. Buying the highs of an individual stock where the sector is also making new highs should give you a better return. I'd say buying highs in a bear market will work too, but that depends heavily on your target and timeline. It's not going to be like a bull market where you buy the high and then you can leave your position there for months and just ride it higher. In a bear market, you can buy that high, but you will have to carefully monitor it and understand that the stock will not make huge gains before reversing back to the means.

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Its hard to stop an elephant/ bull elephant/ cow elephant ; TUSK has been still been making higher closes. LOL True; NOT a prediction.