Low-Volume Swing System Journal

Quote from Trend Fader:
Zorak,

In reality I doubt your system.

First of all.. since you are making these tiny little gains.. they will surely be offset by commisions.. and the wide slippage the thin stocks carry.

You have to take that in consideration.
--MIKE
More...

Trend-

Yeah, that's one thing I was wondering about -- would the paper gains
get eaten up by commissions and slippage. But I was also wondering if
someone out there might have any ideas for how to beat this. Could
using limit orders on a brokerage like Ameritrade that charges $10 per
trade for unlimited shares work? I haven't tried this myself ... I
still might ... but it would be nice to get some more ideas and info
before trying this out with real $.

I mean, these stocks may have low volume, but they are getting traded.
Someone must be making money on these trades or they couldn't keep
doing it, right?

zorak
 
Quote from MondoTrader:

with profits that small, you will need a tremendous number of wins and hope that you never have a large loss. Kind of walking on thin ice. But more power to you for making a system of your own.
More...

Mondo-

Not sure what you mean by "profits that small". 1% a day, if
it's really possible, would add up.

zorak
 
Code: 
Rank	LONG	Last	SHORT	Last

1	CLCI	0.13	VWPT	0.56
2	PRCM	0.22	TXBI	1.37
3	GRA	1.56	BEAV	1.94
4	VDAT	0.12	MDEA	0.90
5	IMCO	2.17	CTLM	4.31
6	AXTI	0.72	MTZ	1.97
7	DTPI	1.61	ATCO	3.82
8	SGNT	0.08	NPRO	0.75
9	COPY	0.15	CNH	1.69
10	CCRT	6.16	MICC	6.11
11	SBAC	1.11	VASO	1.00
12	MROI	7.96	DZTK	2.22
13	SUPG	2.47	MSLV	1.59
14	ADAT	2.12	SIGM	5.70
15	SOFO	0.39	GENE	1.58
16	TGEN	0.53	ICCA	1.02
17	APWR	4.45	MEH	1.63
18	ORCH	0.36	TLRK	5.07
19	APS	0.32	DGIT	2.66
20	CHRD	1.06	OPTK	1.53

		Time:	3/26/03 3:31 PM

zorak
 
Code: 
DAY	LONG	SHORT	ALL
3/26	-3.39%	-0.24%	-1.82%
Total	-2.32%	0.44%	-0.94%

Bad day. I added some detail to the attached daily report.
I put comments at the top of each column, in an attempt
to explain everything in the worst, most confusing way
possible. Let me know if I succeeded.

zorak
 

Attachments

Zorak,

There is nothing you can do to avoid the slippage for these low volume stocks... Honestly.. I would look for a completely different strategy..

You will be making so many trades.. and you trades will be highly dependent on low commisions and more importantly the execution price... Since you are trading very thin stocks... you are doomed to fail.

You should try this strategy with a basket of highly liquid stocks.. where execution is more realistic...


---MIKE
 
Just to clarify my earlier post...

Your system is dependent on making a lot of trades... dependent on getting a good fill.. and dependent on transaction costs per a trade..

Although your transaction costs can be minimized with a broker like IB... you are doomed to fail because you are trading illiquid stocks which is contrary to getting good fills.


--MIKE
 
Code: 
Rank	LONG	Last	SHORT	Last

1	CLCI	0.11	MICC	6.78
2	NVTL	1.00	PME	0.65
3	DIGX	0.36	PCOM	0.16
4	RCNC	0.75	CTLM	4.75
5	FWC	1.16	SGNT	0.11
6	GRA	1.48	TXBI	1.33
7	BMM	1.21	COPY	0.18
8	HAKI	1.53	MTSN	1.98
9	EXBT	0.12	CORV	0.69
10	INLD	0.70	UCOMA	3.00
11	DSLN	0.40	ASIA	4.50
12	VNWK	1.40	TAXI	3.78
13	EMKR	1.66	ASPX	0.11
14	NTCT	3.20	DDIC	0.17
15	AXTI	0.70	CTEC	8.31
16	VION	0.30	VLNC	2.05
17	TTMI	3.70	THDO	1.82
18	GNSC	1.19	MEH	1.56
19	OPNT	5.78	MSLV	1.59
20	NTPA	1.38	NUVO	0.94

		Time:	3/27/03 3:31 PM

zorak
 
Quote from Trend Fader:

Just to clarify my earlier post...

Your system is dependent on making a lot of trades... dependent on getting a good fill.. and dependent on transaction costs per a trade..

Although your transaction costs can be minimized with a broker like IB... you are doomed to fail because you are trading illiquid stocks which is contrary to getting good fills.


--MIKE
More...

MIKE -- are you sure illiquid stocks make it hard to get good fills? Is
there something wrong with the idea of going for possibly great --
albeit infrequent -- fills?

For example, on Tuesday, zorak lists SOI long at $2.13. On Wednesday,
he doesn't list SOI so this means we're supposed to get out. His paper
results get out at the closing price, $1.99. That's a -6.57% return,
not including commission.

Now one way to try to trade this would be to scatter some orders and see
if any or some or all of them fill. On Tuesday at 3:32pm, SOI is quoted
at 2.13 x 2.15. So bid 2.14 for 1000, 2.13 for 2000, 2.12 for 3000, and
2.11 for 4000. If I'm reading the tape right, you'll fill at 2.14, 2.13
and 2.12 but not at 2.11 ... total of 6000 shares at an average price of
2.1329 including Interactive Brokers commission.

On Wednesday at 3:32pm, SOI is quoted at 2 x 2.02. So scatter some
orders again: 3000 at 2.01, 2000 at 2.02 and 1000 at 2.03. You fill at
2.01 by 3:40, but then SOI falls to 1.99 x 2.00, so cancel at 2.02 and
2.03 and replace them with offers at 2.00 and 2.01. The 2.00 fills
around 3:55, and after waiting a couple more minutes, you cancel the
2.01 and dump your last 1000 shares at 1.99 (the bid). Average price of
1.9970 including commission and SEC fee.

Actual return of -6.32% including commissions and fees, which is higher
than the paper return (which didn't include commissions and fees). Not
a great pick by zorak, but fills weren't the problem, at least not in
this example.
 
Yes I am convinved fills are going to be horrible in the long run.... especially when the market is volatile...

I bet you if ZOrak was actually trading his system with real $.. his results would be much different than his paper trading.. therefore... his paper trading is not a true representation of how much $ he is making/losing...


--MIKE
 
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