My simple, yet profitable trading strategy

[traderich]

thanks brown!

I think you need to realize the reason most folks would not or cannot trade this method.

1) You need 50k in cash to reasonably trade this way.
2) there will be days where you lose $1800.
3) there will be a week where you could lose 5k.
4) It takes willpower to stick to this plan even when I know it
works!

Day's like today though make up for the down days!

Did you look at the list for today?


p.s. regarding averaging each stock, Doing that kills the method.
Often times the $5 stocks that make the list are duds!

 

[thegazelle]

OK, gotcha. Thanks for the heads up. Since you have concluded that most $5 stocks are duds, do you still play them to make the system consistent or do you skip them?

 

[CaptainObvious]

I take it from your OP that you've been trading this strategy for the past 3 months. Is that correct? The point...it's been a wild ass bull market. Would this strategy work in a bear/sideways market?
At any rate, good show, and congrats on the profits you've taken.

 

[Maverick1]

Quote from traderich:


I can post the last 3 months of results if you would like to backtest the strategy.

This is just a plain and simple method that has been working. It's not earth shattering. I average about $225 profit per day. [/B]

Traderich,

What is this strategy's premise? Why should it work? Can you formulate an answer for me?

At first glance, it seems to me that you are attempting to benefit from (i) relative strength of top performers (ii) a bull market.

The last 3 months the SPX has posted a ~8% annualized return. What will happen if/when the SPX does 0% annualized over the next quarter/s?

 

[traderich]

I still buy the $5 stocks just the same as the $150 stocks.

I am sure there is a way to further improve this strategy and I often wonder how I could sift through the top 6 stocks and know which of these will be the winners of the day and only buy them!

Can you imagine how good that would be??

Until I can do that, I just buy the basket of 6 and let the good apples take care of the bad apples!

 

[traderich]

I have been tracking this data on and off for about 2 years.

I have tried to see if there is any correlation between how these stocks did when the DOW was up or down and didn't see any correlation.

Backtesting this method will be difficult because I am using top % gainers at a very specific time and even though you might have software to look at a particular stock for a given day, you won't know which stock was of interest for that day.

If you are interested in the data I have, PM me.

 

[late apex]

Quote from traderich:

If you do end up real trading these, buy 1000 shares each, 500 at the bare minimum. Anything less will make this profitable method a loser.

Interesting. Why do you believe that reducing the quantity bought across the board would turn positive expectancy into negative?

 

[El OchoCinco]

You have to look at the underlying premise of your strategy.

Your theory is that the top % gainers of the day by 10:00 AM will more likely than not continue to keep moving higher throughout the day with a greater probability than a stock with a huge gain will pullback sharply.

The key is to understand why those stocks are busting out on a given day and determine if the factors (either fundy or techy or both) exist such that the morning surge is very likely to conitnue (i.e. good news for the long haul means continued stock price increase , etc..).

Looking under the covers as to the whys will help you pick better ones out of the top 10 and weed out the ones that take off like a rocket and sputter 45 minutes after the open. You will want to avoid the speculative surges and instead focus on strong reactions to news perhaps.

 

[traderich]

I can talk in more detail about how I started out thinking of a strategy and how I refined it to the current state.

I am just posting this so you can see I have been looking at this for 2 years now so its not something like a flash in the pan. I have given it a good amount of time and reasoning. I have played devil's advocate. Many of the things that some people will say, I have already thought about, some I have not and I guess that is what I am after. I realize I am taking a big chance by letting this out, but I am hoping to make more than $200/day.

 

[thegazelle]

Quote from late apex:

Interesting. Why do you believe that reducing the quantity bought across the board would turn positive expectancy into negative?

I'm just speculating, but perhaps because of commissions? I.e. , OP is paying $42 in, $42 out @ Scottrade, for a commission of $84 each day. Perhaps he could shed some light on this?