How valid is this edge?
- Thread starter shainadir
- Start date
If you were to purchase ARO at the open on every Monday for the past year, the gains at sometime during the week were as follows- 1/2% 52/52 weeks, 1% 51/52 weeks, and 2% 45/52 weeks. Even with slippage, if you were to buy at the open on Monday and put a sell stop at 1%, the chances of a win based on past results would be at a minimum of 85%. Why is this not an edge? Isnt TA just a study of past performance to predict future performance?
As far as risk management goes, I plan on purchasing a total of 300 shares with 100 at open and the rest on dips. If the market turns, than I will put a stop at 1% from my lowest purchase point.
What are other ways that I can manage my risk?
1) Be willing to act on your own ideas/methods.
2) ARO has trended higher since December-2008. You may be mesmerized by that performance when your strategy should have done "well". You may be minimizing the downturn from September-2008 to December-2008 when you may have experienced consistent losses.
3) I would be slightly concerned that you are adding-on to losing positions with your entry.
Quote from nazzdack:
1) Be willing to act on your own ideas/methods.
2) ARO has trended higher since December-2008. You may be mesmerized by that performance when your strategy should have done "well". You may be minimizing the downturn from September-2008 to December-2008 when you may have experienced consistent losses.
3) I would be slightly concerned that you are adding-on to losing positions with your entry.
Please read my entire entry, my data is from 6/08 to 6/09. During the down months, ARO still made the weekly gains.
As for ARO, I am not putting all my eggs into one basket. I'm just using it as an example. There are other options both long and short that I have found using the same screener with similar results for the past 52 weeks. Take a look at DVN for short sales.
You're confusing brains with a bull market.
This 6-month rally is not necessarily indicative of future macro-trends.
Yes, long-term market bias is up. Whether that continues unabated (see the 1990's Japanese Nikkei) is questionable. We could have another 5 month decline given recent numbers, then what of your strategy then?
The Golden Age of buy-and-hold is gone. Decades of Fed-induced asset inflation is coming to a head where consistent appreciation in the market or real estate will be a thing of the past. Unless, of course, the dollar collapses and we get hyper-inflation. In that case, yea, the strategy will work great! Too bad, you won't be able to buy the paper its printed on for the money it makes..
Bottom line, no, you don't have an edge. Keep looking.
