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My simple, yet profitable trading strategy
- Thread starter traderich
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Makosgu,
Thanks for the below. Some queries.
So at exactly what time will you start entering the position?
Do you know of any trading platform that can eliminate the gaps to calculate this information?
TIA
Thanks for the below. Some queries.
So at exactly what time will you start entering the position?
Do you know of any trading platform that can eliminate the gaps to calculate this information?
TIA
Quote from makosgu:
TR, ignore the masses who will condemn you for they cannot logically tell you where you have a fallacy. The bull market comment made to you earlier is irrelevant. On occasion, for giggles and what have you, I run a slight slant on what you are now beginning to realize. You and I are talking about the entire market of stocks available to trade (ie. thousands and thousands). But do you know why this is working? The "most active" part is telling you something in that it is identifying those that have an unusual amount of volume. If you check the charts, you will see it. However, you can get into a very interesting paradigm shift by just using price as a percentage. By using relative pricing, you can alot the same amount of capital to each asset. 100K, 20K per asset (ie. top 5 gainers), and then manage your swapping as you watch them run. NOW, here's the slant. If you realtime stream the top gainers much like the nasdaq heat map, you can explicitly see when names swap in and out of this leader board. Invariably, the question arises as to when do you take action? My action is when a new asset's gain surpasses the #5 gainer to simultaneously become the NEW #5 gainer, hence relative price charting. As an illustration, it is like watching the leader board at your favorite nascar race. The leader board at a race changes/shifts periodically. A car (ie. asset) makes its way through the pack all the while having a position (ie. relative price or percent gain/loss) that is monitorable. When a car passes a higher ranking car on the leader board, it simultaneously assumes the new higher rank/position. Conversely, if it is passed by a lower rank car, it loses it's rank.
With any given tradeable market with a significant number of assets, we can do the same exact thing. Every asset is a car that is fighting for position and ultimately YOUR capital. It only makes common sense to be investing your capital in vehicles that are performing which incidently, will be the top ranked cars at all times. As a result, my only job is to be CONTINUALLY monitoring the assets, and swaping out asset vehicles as their rank moves them in and out of the leader board. For me, the starting line is the opening bell (ie. all assets have 0% change in price). This way, I do away with gaps and other phenomenons. As the market unfolds some go negative some go positive. Essentially, it is the gun firing for all assets to make a full out sprint. Unlike in horse racing where you can't change the horse you have chosen to win, I have shifted the paradigm so that I choose the horse that is currently leading the race. At any point in time along the race, should there be a change of leaders, then I swap horses for the newly leading horse.
What it all boils down to is that out of thousands of stock, there is going to be at least one top gun on every single day. Whether you look at the top 1 or the top 5 or the top 10, the point is that all will have performed. With this paradigm, there is no guesswork nor betting. You are just riding shotgun with the leaders. When they stop leading the pack, you stop riding shotgun with them and swap into the new leading vehicle at the exact moment that the change occurs. Nothing in trading prevents us from changing our pick. So why not exercise this. As a result, you are keeping on the tail right side of the winners... Think about this. I'm pretty sure you'll "get it". One day, one of those hedgies will figure it out. No mathematical quant model will tell them this because it has nothing to do with betting or edges. If they took a stochastic interest rate model and graphed a few thousand simulated paths, I would then ask them which one of those paths would they get the highest return? Comparatively, every asset is a realtime simulation path. Choosing the winning path is easy. Most second guess the change for all the usual psychological trading issues. Perhaps this all sounds like fluff. Just tack this post on the wall for later...
Regards,
MAK
How long have you noticed that? Seems that both Traderich and yourself have this view. I am wondering why the loss should be relatively smaller than the gain. Could it be because for losers, the gaps are usually larger than the gainers, thus price movement for losers on that day tend to be relatively smaller than the gainers ? Any ideas? Just thinking aloud.
Quote from ByLoSellHi:
I've noticed for some time that winners tend to have outsized gains relative to losers on any given day.
Interesting Rich. Thanks for this interesting methodology.
Caveat - Margin will destroy the best of traders and even investors very quickly in a bear market. DESTROY. You'd better make damn sure we're in a true bull run before you start daytrading on margin.
To Telozo:
The guy who posted about shorting the % gainers: He mentions he does it, but when and how. Is he shorting the top 6 at 10am and then covering at 10:30? or leaving till end of day or midday or what?
Often times my list of 6 are down at 10:30 or 11am for a few hundred bucks, sometimes more. However, what typically happens on the great days like today, the couple big winners just go crazy and carry the weight of the couple duds.
He isn;t very clear about his method. I am very specific about what I do and how I do it.
Also: I did say that I close out at 3000 for the good days. This is relatively new. If you look at my spreadsheet(s), the data shows holding until 3:55.
Closing out at 3000 gain or 1800 loss is something I have recently done to try and 'tweak' the method.
Regarding shorting the losers: This may work as well. I haven't researched it enough to know but it may work just as well.
For all I know, there may be a brilliant mind on ET who will say that the key to my success is simply letting the winners ride and cutting my losses at the right time. It could be that if I randomly took 6 stocks off the % gainers list at 10am I would do just as well as the TOP 6. I am looking into this as well. I am constantly trying to make this method even better. Any thoughts are welcome.
The guy who posted about shorting the % gainers: He mentions he does it, but when and how. Is he shorting the top 6 at 10am and then covering at 10:30? or leaving till end of day or midday or what?
Often times my list of 6 are down at 10:30 or 11am for a few hundred bucks, sometimes more. However, what typically happens on the great days like today, the couple big winners just go crazy and carry the weight of the couple duds.
He isn;t very clear about his method. I am very specific about what I do and how I do it.
Also: I did say that I close out at 3000 for the good days. This is relatively new. If you look at my spreadsheet(s), the data shows holding until 3:55.
Closing out at 3000 gain or 1800 loss is something I have recently done to try and 'tweak' the method.
Regarding shorting the losers: This may work as well. I haven't researched it enough to know but it may work just as well.
For all I know, there may be a brilliant mind on ET who will say that the key to my success is simply letting the winners ride and cutting my losses at the right time. It could be that if I randomly took 6 stocks off the % gainers list at 10am I would do just as well as the TOP 6. I am looking into this as well. I am constantly trying to make this method even better. Any thoughts are welcome.
Quote from traderich:
For all I know, there may be a brilliant mind on ET who will say that the key to my success is simply letting the winners ride and cutting my losses at the right time. It could be that if I randomly took 6 stocks off the % gainers list at 10am I would do just as well as the TOP 6. I am looking into this as well. I am constantly trying to make this method even better. Any thoughts are welcome.
I'm handsome but not brilliant but with that said, I wish you all the luck in the world. One of the main keys to success is Hard Work. So keep working hard at this plan you have and you might just make a very good living. I hope you do. People who will just follow a plan without working it will not be successful but you sound to me like you put a lot of effort, hours and WORK into it so:
Good Luck!
Quote from telozo:
There is another recent thread on a method that does the oposite:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=83935
Interesting. Shorting the top gainers is profitable according to the thread referenced above, and going long the top gainers is profitable, too, according to this thread. Does this mean I can double my profit by doing both? The simplicity of this strategy can't be beaten: I simply short and long the same quantity of the same stock at the same time. Factor in the risk (which is zero, because I have a perfect hedge), and my Sharpe's ratio is through the roof.
I'm glad someone else pointed this out>
If you got out at $3,000 on Friday you should have had a loss for the week no?
Of course that was the first thing I thought> and when I stopped reading about the great new investing plan of scalping rides on hot stocks.
Geez trying to get ahead of big orders is what many of these hedge funds are doing on a daily basis. As a small investor if you really want to sit in front of a computer every day, seven days a week and buy that number of stocks every day? It's daunting. Remember we are all animals. It's bad enough we are shut away in an island wrapped in steel, that our feet hit concrete not soil. As an animal do you want the freedom to get out and get some some stuff accomplished? To take a few days off and let your winners run? Or be worried every day that you're going to have to sell everything at a loss? I like to make something no matter how little EVERY day-- now that adds up --
*Since economic news often comes out at 10:00 I wonder market direction wise if results are better or worse if you buy at 10:30?
If you got out at $3,000 on Friday you should have had a loss for the week no?
Of course that was the first thing I thought> and when I stopped reading about the great new investing plan of scalping rides on hot stocks.
Geez trying to get ahead of big orders is what many of these hedge funds are doing on a daily basis. As a small investor if you really want to sit in front of a computer every day, seven days a week and buy that number of stocks every day? It's daunting. Remember we are all animals. It's bad enough we are shut away in an island wrapped in steel, that our feet hit concrete not soil. As an animal do you want the freedom to get out and get some some stuff accomplished? To take a few days off and let your winners run? Or be worried every day that you're going to have to sell everything at a loss? I like to make something no matter how little EVERY day-- now that adds up --
*Since economic news often comes out at 10:00 I wonder market direction wise if results are better or worse if you buy at 10:30?
Based on the PM's and the posts here, I have some new things to help improve this even more. Thanks !
I realized that posting this was a risk, but the feedback overall was not too bad.
One comment about "all this $%^*" for 225/day:
The 225/day is based on 1000 shares traded. If you have more money, buy 2000 shares or 5000 shares at a time. Make 5000 a day, but it will take more capital. You will be limited to how much of some of these stocks you could reasonably get without significantly moving the price obviously.
I am curious how many of you will trade this next week.
Of course I will be thinking that someone is jumping in front of me as I try to buy these stocks on Monday at 10am sharp!
I might have to jump to shorting the top losers of the day! lol.
I realized that posting this was a risk, but the feedback overall was not too bad.
One comment about "all this $%^*" for 225/day:
The 225/day is based on 1000 shares traded. If you have more money, buy 2000 shares or 5000 shares at a time. Make 5000 a day, but it will take more capital. You will be limited to how much of some of these stocks you could reasonably get without significantly moving the price obviously.
I am curious how many of you will trade this next week.
Of course I will be thinking that someone is jumping in front of me as I try to buy these stocks on Monday at 10am sharp!
I might have to jump to shorting the top losers of the day! lol.
Simplicity of the strategy would probably make it difficult for many ET guys to take it seriously. As for money management, you disregard stock's volatility (you would buy 1000 stocks of GE and CME regardless). I would adjust your portfolio size based on market action, make stocks equally weighted and cut your losers fast......
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