Semi-Low-Volume Swing System Journal

("man" made some comments in my earlier journal, I'm moving them here.)

---------------------------man---------------------------
> I agree with Trendfader. Though smaller stocks are more inefficient,
> thus open more opportunity you simply cannot seriously short a 20 Cent
> stocks. Once in a while you will be blown out so horribly on a single
> trade, that you can forget the stable profits made up to then. It's like
> shorting naked options.
---------------------------man---------------------------

This is true. You can even see it in the program's historical paper
results, which show a lot of volatility despite never putting more than
1/20th of assets into any one short position. Not shorting penny stocks
should reduce the volatility a lot.

---------------------------man---------------------------
> Looking forward to your new thread. And I think the paperresults need
> not at all be that impressive. 1% per day is way too huge. by compoudng
> that would be 1177% p.a.. I assume the strategy will continuously suffer
> from more efficiency in bigger stocks, but if it makes 0.2% a day, that
> would still account for 67% p.a.
---------------------------man---------------------------

I haven't been compounding the paper results. Even if someone can figure
out a way to trade these stocks and get a fraction of the >1% per day on
paper, it seems unlikely that you'd be able to keep trading more $ with
these low volume stocks.

Thanks for your interest!

zorak
 
I would like to come back to yoiu and consider real backtesting of that kind of approach - if that would ever be in your interest. I am currently trying not to overload my IT.


peace
 
Zorak.. you have 2 more important issues to deal with..

First.. you are not deducting commisions and slippage from your system... this can make a big difference...

Second.. and most importantly.... you need a position sizing strategy... you cant just be buy 100 shares across the board for each stock... nor can you buy an equal dollar amount for each position... you need something that increases position size as you make $ and decreases when you are losing.. and you need some way to calculate your risk.. via stop loss..

You are overlooking the most important parts of trading.. Percentage performance does not mean anaything unless.. you have a method of risk control...
 
Quote from Trend Fader:

Zorak.. you have 2 more important issues to deal with..
First.. you are not deducting commisions and slippage from your system... this can make a big difference...
More...

I guess. What level of return on papertrading would you
like to see on a system that doesn't deduct these things?

Do you have an estimate of what % a good, experienced
trader would lose in commish/slippage?


Second.. and most importantly.... you need a position sizing strategy... you cant just be buy 100 shares across the board for each stock... nor can you buy an equal dollar amount for each position...
More...


Why can't I do the latter?

you need something that increases position size as you make $ and decreases when you are losing.. and you need some way to calculate your risk.. via stop loss..
More...

Yes, these sound like nifty ideas...maybe they would even
work with the program I have. These might be the kinds of
improvements that would generate an even better
return as compared to paperport...tho I would be plenty
happy if I were able to just replicate paperport the way
it is, unrefined position sizing and all.


You are overlooking the most important parts of trading.. Percentage performance does not mean anaything unless.. you have a method of risk control...
More...

Is there any %-return that would interest you enough to look
into these things?

zorak
 
zorak
how are you trading your other strategy? you mentioned earlier that you are actually doing something with bigger stocks.

I guess truth lies in between. you won't be able to usefully trade the kind of portfolio you have been describing here. and you won't loose all profit if you move some steps up on the liquidity stair case.


peace
 
Quote from man:

zorak
how are you trading your other strategy? you mentioned earlier that you are actually doing something with bigger stocks.
More...
It's pretty similiar. Lists are generated, and I put an equal
$-amount into each position.

I guess truth lies in between. you won't be able to usefully trade the kind of portfolio you have been describing here. and you won't loose all profit if you move some steps up on the liquidity stair case.
peace
More...
Other than choosing stocks with higher volume, can you think
of anything that would make these lists more tradeable? Is
volume the only reason you don't think this portfolio can
generate returns close to paperport?

zorak
 
Code: 
Rank	LONG	Last	SHORT	Last

1	MDR	2.48	MEH	3.23
2	ARDM	1.06	PGNX	6.43
3	PLXT	2.37	GGNS	2.37
4	ARIA	1.39	PDII	9.43
5	SBAC	1.24	PRKR	10.10
6	VWKS	3.42	STAT	6.16
7	TTEC	4.93	CANIE	2.71
8	PHMD	1.35	CMRC	2.40
9	VVUS	4.41	AWA	2.77
10	NETE	3.40	DGIT	3.21
				
		Time:	4/7/03 3:30 PM

zorak
 
illustrating the picture. these are the trades that took place in one of your shorts. Total volume on that day less than USD 100.000,-. Being short that stock when any news comes in on that title and a single serious investor entering the scene spells desaster. I think your original idea was to find somebody with more trading experience than you have yourself. I don't think you will find somebody, since with trades happening every five minutes and a spread of 2% and more there simply is no "trading" these stocks.

IMO the problem is always the short side. One singel squeeze takes you bakc to the start very easily. Why not short DJ futures or etf's against the long small cap position? You could do that easily on your own, without anyone else?

I think you approach is very good and very interesting.


peace
 
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