Well today was the first day that I actually used this method. I went short on 200 shares of DVN and BXP and reached my buy stop on both trades. I just wanted to get input on what others thought of this system and to see if there are ways that I can improve my results and minimize risks.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
How valid is this edge?
- Thread starter shainadir
- Start date
Well today was the first day that I actually used this method. I went short on 200 shares of DVN and BXP and reached my buy stop on both trades. I just wanted to get input on what others thought of this system and to see if there are ways that I can improve my results and minimize risks.
Quote from shainadir:
Please read my original post...I am not buying and holding. My trades will last a few days at most. Again, I used ARO as an example for days when the market has an upside, I have short options as well.
I read your original post.
Your strategy is long-bias. Similar to buy-and-hold, with a shorter duration. As such, you'll experience similar draw-downs in bear markets/pullbacks/chop that long-only investors suffer.
Its obvious you're relatively new to trading and don't understand the rather flippant and half-baked ideas you're throwing out here.
First, if there was any merit whatsoever to these edges, they'd be gone by next week since you posted them on a public forum.
Second, you mention having both long and shortable options for a "downside" or "upside" market.......let me give you some friendly advice: if any trader knew in advance short-term market direction, they'd be billionaires in a few years (and some are). Thats the entire game, man - up, down or sideways. Then to casually mention you've got some indicator or formula to predict an upside or downside market - AS IF that's the easy part!! -- yea, okay. Fund a real account and see if it works.
Third, you've got no strategy for market timing, hence no reasonable stop loss. Risking 100K to gain 60K, as some other poster mentioned, is suicide with this approach.
What you're doing is generalizing market mechanics from anecdotal observations made during a rustling of the leaves.
I can tell you right now, there's no fundamental reason why this strategy should work any better than a buy-and-hold strategy, in a Bull Market.
And like I said in my original post, the 7 year bull markets of yester-year, are gone. So you're barking up the wrong tree.
Quote from Ken More:
YOU trade 20C ES with 100 pt stop! And you talk about risk management?
I've been a full time futures trader since 1984. First thing I learned was risk management- playing good defense as Paul Tudor Jones would say. He worried about how much he could lose each day. Figured if it was good enough for him, it was good enough for me. I'm still around 25 yeras later making 7 figures, year in and year out. A 100 pt stop is RIDICULOUS.
You're risking $100,000 to make $64,000...
Your timing isn't bad so why take such a risk? You WILL eventually blow out just like the idiots who keep adding to a losing position instead of taking the loss.
What's wrong with a 100 point stop? Shorting the S&P from the Oct 07 highs down to the March 09 lows required a larger stop than 100 points. Being long from March 2003 until 2007 couldn't be done with a smaller stop.
Quote from shainadir:
My strategy is to buy at the open on Monday and set a sell limit at when the price increases by 1.5%. Is this a legit strategy or am I missing something? All comments will be appreciated.
What's your risk control? What's your exit strategy if the price does not increase 1.5%? What are the main mistakes you could make with this strategy? Under what market conditions would the strategy be likely to lose lots of money?
These are a few questions that need answering before you start trading with this approach.
Worked okay this year, but not a huge edge. And in previous years, just a little better than b/e. You might try it, but I wouldn't risk too much money on it. It probably won't last very long.
Time: 1 year
1000 shr positions
Buy at open Monday, sell at 1.5% PT, or Friday at open (worked a little better than selling Monday at open).
Note: to avoid any lookahead problems, profit target sales are always applied starting the next day after entry.
0.01 per share, no slippage.
Profit: $10,750
Win %: 86
Max DD: $6,000 (9/2008)
PF:1.9
TRADES (never could get columns to line up on ET)
Time: 1 year
1000 shr positions
Buy at open Monday, sell at 1.5% PT, or Friday at open (worked a little better than selling Monday at open).
Note: to avoid any lookahead problems, profit target sales are always applied starting the next day after entry.
0.01 per share, no slippage.
Profit: $10,750
Win %: 86
Max DD: $6,000 (9/2008)
PF:1.9
TRADES (never could get columns to line up on ET)
Code:
Positn Symbol Shares Entry Date Entry Price Exit Date Exit Price % Change Net Profit Bars Held Profit/Bar Entry Signal Exit Signal Cum Profit MAE % MFE %
Long ARO 1,000 7/21/2008 32.29 7/22/2008 32.77 1.44 464.35 1 464.35 Buy on Monday Open Profit Target 464.35 -3.41 1.95
Long ARO 1,000 7/28/2008 31.23 7/29/2008 31.70 1.44 448.45 1 448.45 Buy on Monday Open Profit Target 912.80 -2.82 1.50
Long ARO 1,000 8/4/2008 31.73 8/5/2008 32.21 1.44 455.95 1 455.95 Buy on Monday Open Profit Target 1,368.75 -4.10 1.50
Long ARO 1,000 8/11/2008 34.40 8/12/2008 35.00 1.69 580.00 1 580.00 Buy on Monday Open Profit Target 1,948.75 -1.22 8.72
Long ARO 1,000 8/18/2008 35.73 8/22/2008 33.90 -5.18 -1,850.00 4 -462.50 Buy on Monday Open Time-Based 98.75 -9.43 0.64
Long ARO 1,000 8/25/2008 33.65 8/27/2008 34.15 1.44 484.75 2 242.37 Buy on Monday Open Profit Target 583.50 -3.92 1.50
Long ARO 1,000 9/8/2008 36.51 9/12/2008 34.95 -4.33 -1,580.00 4 -395.00 Buy on Monday Open Time-Based -996.50 -6.38 1.94
Long ARO 1,000 9/15/2008 33.49 9/16/2008 33.99 1.44 482.35 1 482.35 Buy on Monday Open Profit Target -514.15 -0.24 5.97
Long ARO 1,000 9/22/2008 32.59 9/26/2008 30.27 -7.18 -2,340.00 4 -585.00 Buy on Monday Open Time-Based -2,854.15 -8.56 1.47
Long ARO 1,000 9/29/2008 30.96 9/30/2008 31.42 1.44 444.40 1 444.40 Buy on Monday Open Profit Target -2,409.75 -2.75 3.59
Long ARO 1,000 10/6/2008 26.96 10/7/2008 28.64 6.16 1,660.00 1 1,660.00 Buy on Monday Open Profit Target -749.75 -4.38 6.23
Long ARO 1,000 10/13/2008 27.52 10/14/2008 28.59 3.82 1,050.00 1 1,050.00 Buy on Monday Open Profit Target 300.25 -8.50 3.89
Long ARO 1,000 10/20/2008 24.50 10/21/2008 25.30 3.18 780.00 1 780.00 Buy on Monday Open Profit Target 1,080.25 -1.02 5.31
Long ARO 1,000 10/27/2008 20.49 10/28/2008 21.63 5.47 1,120.00 1 1,120.00 Buy on Monday Open Profit Target 2,200.25 -0.93 8.54
Long ARO 1,000 11/3/2008 24.18 11/4/2008 24.54 1.42 342.70 1 342.70 Buy on Monday Open Profit Target 2,542.95 -5.09 4.05
Long ARO 1,000 11/10/2008 19.17 11/14/2008 17.43 -9.18 -1,760.00 4 -440.00 Buy on Monday Open Time-Based 782.95 -22.85 3.39
Long ARO 1,000 11/17/2008 16.00 11/21/2008 13.18 -17.75 -2,840.00 4 -710.00 Buy on Monday Open Time-Based -2,057.05 -18.25 2.81
Long ARO 1,000 11/24/2008 14.00 11/25/2008 15.25 8.79 1,230.00 1 1,230.00 Buy on Monday Open Profit Target -827.05 -2.29 8.93
Long ARO 1,000 12/1/2008 14.56 12/3/2008 14.78 1.36 198.40 2 99.20 Buy on Monday Open Profit Target -628.65 -14.01 1.50
Long ARO 1,000 12/8/2008 17.70 12/9/2008 17.99 1.53 270.00 1 270.00 Buy on Monday Open Profit Target -358.65 -7.74 3.79
Long ARO 1,000 12/15/2008 15.54 12/16/2008 15.77 1.37 213.10 1 213.10 Buy on Monday Open Profit Target -145.55 -3.09 1.80
Long ARO 1,000 12/22/2008 17.61 12/29/2008 16.23 -7.95 -1,400.00 4 -350.00 Buy on Monday Open Time-Based -1,545.55 -12.78 2.39
Long ARO 1,000 12/29/2008 16.23 12/31/2008 16.47 1.38 223.45 2 111.73 Buy on Monday Open Profit Target -1,322.10 -5.11 1.50
Long ARO 1,000 1/5/2009 17.93 1/6/2009 18.63 3.79 680.00 1 680.00 Buy on Monday Open Profit Target -642.11 -0.22 4.85
Long ARO 1,000 1/12/2009 19.81 1/15/2009 20.11 1.40 277.15 3 92.38 Buy on Monday Open Profit Target -364.96 -6.76 1.50
Long ARO 1,000 1/26/2009 20.48 1/27/2009 20.89 1.90 390.00 1 390.00 Buy on Monday Open Profit Target 25.04 -1.76 4.69
Long ARO 1,000 2/2/2009 20.80 2/3/2009 21.13 1.49 310.00 1 310.00 Buy on Monday Open Profit Target 335.04 -2.50 3.37
Long ARO 1,000 2/9/2009 23.35 2/10/2009 23.70 1.41 330.25 1 330.25 Buy on Monday Open Profit Target 665.29 -6.12 1.50
Long ARO 1,000 2/23/2009 22.74 2/24/2009 23.08 1.41 321.10 1 321.10 Buy on Monday Open Profit Target 986.39 -5.19 1.50
Long ARO 1,000 3/2/2009 23.47 3/3/2009 24.26 3.28 770.00 1 770.00 Buy on Monday Open Profit Target 1,756.40 -4.52 3.37
Long ARO 1,000 3/9/2009 22.45 3/10/2009 23.24 3.43 770.00 1 770.00 Buy on Monday Open Profit Target 2,526.39 -2.32 4.10
Long ARO 1,000 3/16/2009 25.55 3/18/2009 25.93 1.42 363.25 2 181.62 Buy on Monday Open Profit Target 2,889.64 -4.93 1.68
Long ARO 1,000 3/23/2009 25.15 3/24/2009 25.53 1.42 357.25 1 357.25 Buy on Monday Open Profit Target 3,246.89 -3.30 2.47
Long ARO 1,000 3/30/2009 25.93 3/31/2009 26.40 1.74 450.00 1 450.00 Buy on Monday Open Profit Target 3,696.89 -2.47 1.93
Long ARO 1,000 4/6/2009 27.99 4/9/2009 28.50 1.75 490.00 3 163.33 Buy on Monday Open Profit Target 4,186.89 -10.33 1.82
Long ARO 1,000 4/13/2009 30.24 4/16/2009 30.69 1.43 433.60 3 144.53 Buy on Monday Open Profit Target 4,620.49 -4.10 1.50
Long ARO 1,000 4/20/2009 30.20 4/21/2009 30.65 1.43 433.00 1 433.00 Buy on Monday Open Profit Target 5,053.49 -3.84 1.50
Long ARO 1,000 4/27/2009 32.49 4/28/2009 32.98 1.44 467.35 1 467.35 Buy on Monday Open Profit Target 5,520.84 -1.48 3.85
Long ARO 1,000 5/4/2009 33.56 5/5/2009 35.34 5.24 1,760.00 1 1,760.00 Buy on Monday Open Profit Target 7,280.84 -0.51 5.93
Long ARO 1,000 5/11/2009 33.38 5/12/2009 34.02 1.86 620.00 1 620.00 Buy on Monday Open Profit Target 7,900.84 -2.13 4.19
Long ARO 1,000 5/18/2009 31.26 5/19/2009 32.44 3.71 1,160.00 1 1,160.00 Buy on Monday Open Profit Target 9,060.84 0.00 3.87
Long ARO 1,000 6/1/2009 35.06 6/2/2009 36.07 2.82 990.00 1 990.00 Buy on Monday Open Profit Target 10,050.84 -0.31 3.94
Long ARO 1,000 6/8/2009 36.16 6/9/2009 36.70 1.44 522.40 1 522.40 Buy on Monday Open Profit Target 10,573.24 -1.02 1.50
Long ARO 1,000 6/15/2009 34.60 Open Open 0.52 180.00 1 180.00 Buy on Monday Open 10,753.24 -1.16 0.78Quote from shainadir:
Well today was the first day that I actually used this method. I went short on 200 shares of DVN and BXP and reached my buy stop on both trades. I just wanted to get input on what others thought of this system and to see if there are ways that I can improve my results and minimize risks.
You should listen to what people are saying here.
(1) You have no edge. Your strategy makes trades on a weekly basis but you are only looking at 52 weeks of historical data.
(2) You have no risk management. Adding to a losing position is not risk management.
I want to encourage you, but you need to listen. You should backtest your idea with real risk management. Maybe you have something, but you will only know for sure if you test it objectively.
What you're trading is an ugly cousin of the martingale strategy. Martingale has you average down at set intervals. For instance you buy X at $50 and you double your position after every 10% decline. Then you simply wait until the investment bounces back and you make X% on your total investment. No stop is present (unless you qualify account implosion as a stop).
Your "edge" is similar in the sense that there is no stop, limited upside and unlimited downside.
There are many issues with this strategy:
1) The largest is that you're using the worst possible investment vehicle: equities. Futures/Currencies are much better suited for this type of strategy as opposed to equities. Of course this is a relative statement since i think the strategy sucks ass and that no matter what you trade you will lose money.
2) No stop, limited gain. This is the exact opposite of cutting your losses short and letting your profits run. In fact, a much better strategy would be to buy X stocks, set a 1.5% sell stop underneath the market, and close out your position at the end of the week.
3) You sight no real proof of a historical pattern. Personal anecdotal "evidence" is not the same as back-tested proof. For instance, over the last 5000 weeks, investment vehicle X has increased by 2% above its Monday opening price 4777 times, or over 95%. This is no proof that it will happen in the future, but it is better than "it seems to happen 95% of the time, from my looking at it for a few weeks."
4) Even if your 95% number is correct, it is meaningless. You must know how much you make on your wins (if it is 95%, then you will make 1.5% on your equity on 95% of your trades), vs how much you lose on your losers (5% of trades do not go your way, how much will you lose on these?).
Your "edge" is similar in the sense that there is no stop, limited upside and unlimited downside.
There are many issues with this strategy:
1) The largest is that you're using the worst possible investment vehicle: equities. Futures/Currencies are much better suited for this type of strategy as opposed to equities. Of course this is a relative statement since i think the strategy sucks ass and that no matter what you trade you will lose money.
2) No stop, limited gain. This is the exact opposite of cutting your losses short and letting your profits run. In fact, a much better strategy would be to buy X stocks, set a 1.5% sell stop underneath the market, and close out your position at the end of the week.
3) You sight no real proof of a historical pattern. Personal anecdotal "evidence" is not the same as back-tested proof. For instance, over the last 5000 weeks, investment vehicle X has increased by 2% above its Monday opening price 4777 times, or over 95%. This is no proof that it will happen in the future, but it is better than "it seems to happen 95% of the time, from my looking at it for a few weeks."
4) Even if your 95% number is correct, it is meaningless. You must know how much you make on your wins (if it is 95%, then you will make 1.5% on your equity on 95% of your trades), vs how much you lose on your losers (5% of trades do not go your way, how much will you lose on these?).
Quote from shainadir:
People are always writing about needing an "edge" to become a successful trader...
I have come across an edge that I did not create but I do believe it will work.
There are some stocks (ARO for example) that consistently give a 1-2% spike in price from the opening price on Monday. I'm not saying that from the beginning of the week to the end on Friday that the price increase is 1-2%..What I'm saying is that sometime during the week, the stock will have a 1-2% gain in price from the opening on Monday. For example, during this past week on Monday, ARO opened at 36.12..it finished the week at 35.09 but on Tuesday it reached a high of 37.18. I have gone over the charts on ARO for the past year and in 95% of the weeks this statistic held true.
My strategy is to buy at the open on Monday and set a sell limit at when the price increases by 1.5%. Is this a legit strategy or am I missing something? All comments will be appreciated.
Quote from bighog:
academic
Valid point you state there. BUT
Alowing for slippage and MISSING a FILL is a totally different situation. We all know most of the profits are made on fewer trades. If you miss even a single fill on one of those then your whole backtesting is bogus.
Do your backtesting and then redo it by pretending you DID NOT get filled on 2 or 3 of the BEST trades and review your results.
AND............ do not forget to include your REALISTIC slippage figures.
i'm no expert but i agree. i think statistically when testing anything...aren't you supposed to throw out the highest and lowest readings for discrepancies?
Well, I'd go for it and buy a Put, maybe a LEAP, / contract to protect myself against any dramatic drop. If this pattern holds, you should come out ahead over the next 26 weeks. You've done the most difficult part, identifying a repeating pattern. If not, sell both the put and stock and take the loss.