See anything wrong with my strategy?

K

KenL

I'm trading a screen that identifies reversals after two big up days(and visa versa) and started using Trade Trigger from Ameritrade to automatically implement the trades.
Today I set Trigger to sell short BQI when it trades at or below 3.59. It did not trigger as BQI ran straight up 10%. That got the wheels upstairs turning...What if I had another Trigger to go long when it trades above yesterday's close of 3.63?

The strategy would be to go short when it trades below yesterday's close and go long when it trade above. Once a trade is executed, a stop loss order is automatically implemented using Trade Trigger, to protect against the trade going against me. The stop will be a fairly tight one, no more than 2%. This should catch those strong runners that don't reverse, such as BQI today.

If you see any downside with this strategy please let me know, so that I don't inflict any serious damage to my portfolio.
 
different strategies work in different markets.

sounds like yours would work in a volatile market but might get killed in a sideways market.

just a thought.
 
Quote from KenL:

I'm trading a screen that identifies reversals after two big up days(and visa versa) and started using Trade Trigger from Ameritrade to automatically implement the trades.
Today I set Trigger to sell short BQI when it trades at or below 3.59. It did not trigger as BQI ran straight up 10%. That got the wheels upstairs turning...What if I had another Trigger to go long when it trades above yesterday's close of 3.63?

The strategy would be to go short when it trades below yesterday's close and go long when it trade above. Once a trade is executed, a stop loss order is automatically implemented using Trade Trigger, to protect against the trade going against me. The stop will be a fairly tight one, no more than 2%. This should catch those strong runners that don't reverse, such as BQI today.

If you see any downside with this strategy please let me know, so that I don't inflict any serious damage to my portfolio.
More...

when you say yesterday close are you including overnigth activity??
 
feb,
No, www.stockfetcher.com uses delayed intraday and end of day data only. Their fees are incredibly cheap, imho. I'm in no way associated with them and this is not an endorsement of any kind. I'm just a subscriber getting an edge in the slotmarket with their service.

Was a day early on BQI as it reversed yesterday and down another 6% today.

RATE is the bounce play for tomorrow.
MECA is the short play.

Details will be posted here http://slotmarket.blogspot.com/
 
Quote from KenL:



If you see any downside with this strategy please let me know, so that I don't inflict any serious damage to my portfolio.
More...

Much depends on how you are defining what you call "two big up days".

If they are truly statistically signicant in terms of the ATR of the stock - and they should be if they are worth trading at all - then by definition you are going to be dealing with a highly volatile situation. And a 2% stop is probably going to take you out of a lot of trades at a loss.

Here you are talking about a stock priced at 3.59. A 2% stop loss is only 7 cents. Not much more than the spread! What are the odds that this stock in a highly volatile mode is going to run straight up or down off the open without a 7 cent counter move in either direction?

Not very great.

Using tight stops on those situations can really slice you up trade after trade. You will likely be better off backtesting your strategy with letting the stock just run to the close after entry, and letting momentum run its course.
 
lindq,

Thank you for your excellent comments. I ran a 2 year backtests and here are the results.

No stops 63% Win, 689 ROI%, $105,670 Equity Total. 8% stop 61% win, 639% ROI%, $104,670. 2% stop 42% win, 809% ROI, $102,898.

Using no stops does indeed make you more money with the highest win %. But one needs to stomach a handfull of double digit percentage losses, 16%, 12, 11, 11, 10. I could use a 8% stop and it wouldn't impact the numbers too greatly but would sure soften the psychological damage from a 10+% hit.

The screen is based on a minumum drop of 8% followed by a min. of 4% drop.
 
Look at the chart on GLD today ! I call it the Monday morning whipsaw. I used Schwab alerts to buy at 65.25, but already owned 25 shares so i could use a "close all" stop before buying shares. My opinion is that the market makers try to shake out the lower stops and the buy on increase orders because they can. Funny... we write simple "programs" to fight very big sophisticated programs that move the market. Odds are against us, but a made a few hundred on GLD today.. thinks it's going over 700.. set to buy MSFT, HPQ, GE on dips to their recent lows. GE long term, tech because PC sales are great after the Vista launch.


Quote from KenL:

GSCO,
You are correct, worst case scenario is if the stock whipsaws around the trigger point and I get stopped out. BRCM did that today and I bailed pretty quick.
All my trades are recorded here http://slotmarket.blogspot.com/
More...
 
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