Spydertrader's Jack Hershey Equities Journal II

[acesheet]

martys said:

I hate to say this because I know I am gonna get stoned. I think JH entry is excellent but the rest of the stuff sounds a bit more like stuff coming out of a technical analysis book. I assure you my opinion worth nothing but I just don't believe price has to advance with volume at all. The TA books would say high volume confirms a break out. My theory about what REALLY happens is THE SAME GUY plans to buy more!! The question is whether the price action or board market will deter his plan or not.

Hi martys,

You shouldn't worry about getting stoned - at least not from me.

Anyhow, the 2nd Chance Rule was developed not from a book about TA (believe me I've read too many), but observations coming from my papertrading adventures.

Everyone has their own observations and conclusions. One of mine has been that its the rare ONE GUY who can move a market or who wants to move the market when he or she is accumulating stock.

I've been tweaking the rules here and there and trying to discern if the trading performance changes based on the tweaks. The 2nd Chance Rule is one of those tweaks.

Thanks for the $0.02....

-ace

 

[Spydertrader]

Well, I threw in the towel. With everybody heading to the exits, I didn't feel like being the last one left to turn out the lights. One-Hundred dollar loss on VDSI. These things happen now and then.

- Spydertrader

 

[martys]

Quote from acesheet:


...

Everyone has their own observations and conclusions. One of mine has been that its the rare ONE GUY who can move a market or who wants to move the market when he or she is accumulating stock.
...

It could be a group of buyers. They don't want to move the market but these stocks are not large caps and have liquidity problem. I am just imagining...

 

[gooch87]

Just after I bought at 10:52, things turned south so I exited right then for a $6.00 loss including commish. I hate it when the price is moving nicely and just after I make the move it goes into the toilet.
G87

 

[martys]

Quote from Spydertrader:

Well, I threw in the towel. With everybody heading to the exits, I didn't feel like being the last one left to turn out the lights. One-Hundred dollar loss on VDSI. These things happen now and then.

- Spydertrader

I guess I will turn off the light (still trailing my stop)...

 

[Spydertrader]

Quote from martys:

It could be a group of buyers. They don't want to move the market but these stocks are not large caps and have liquidity problem. I am just imagining...

No stones to be thrown here, just a different conclusion reached. On the day before a major USA Holiday, RTSX traded at the lowest volume levels out of all Final Universe Stocks with a volume of approximately 49,000 shares traded. The spread often sat around .10 with 400 share lots sitting on either the bid / ask throughout the day. In other words, a trader could have easily purchased 400 shares (or shorted) without moving the market a single cent. Such a purchase would have represented 1% of the shares traded for the entire day. At the other end of the spectrum, we see VPHM - trading 2.1 million shares today. While I agree the opening prints can often show few shares traded, I do not see how you have reached the conclusion that these stocks have "liquidity problems." I have often traded 1000 share lots, and have only rarely experienced significant slippage irrespective of brokerage firm used to place the trades.

- Spydertrader

 

[kming]

For VDSI, one who follows the Hershey method should exit because the volume is far from hitting FRV towards the end of the day. You need to do that whether or not it is showing a loss, unless, of course, you have other reasons to hold VDSI through...

-kming-

Quote from martys:

I guess I will turn off the light (still trailing my stop)...

 

[dougcs]

I did an interesting test today to see if Jack's Jokari window would test out as a system. My interest in this came about after I finished a section of Journal I where Spyder and Trend Fader got into a discussion over whether volume had any predictive value. It's on page 138.

So to see if it did, I wrote a very quick Tradestation strategy that entered when the score went from 0 or 1 to 7, and I added the condition that price improvement was necessary. Entry was taken at the end of the day when the score was 7. Exits were taken also at EOD when the score reached 2 or 3 and close was below yesterday's close.

For the detail guys: It was run over the past 250 days using daily bars. I didn't assume any slippage or commissions.

Results for my JH Universe:

Over 50% of the 400 trades were profitable.
Total profit per trade was about $150, assuming a $10000 position was taken for each trade.

The W/L ratio was 2.

About 70% of the stocks in the test showed positive profits.

For something so simple this is really good. Actually, I was amazed!

Doug

 

[martys]

Quote from kming:

For VDSI, one who follows the Hershey method should exit because the volume is far from hitting FRV towards the end of the day. You need to do that whether or not it is showing a loss, unless, of course, you have other reasons to hold VDSI through...

-kming-

I am gonna make it really dumb for myself... Just 5% trailing... No Ross and No FRV.

Actually I don't like the way VDSI swings when I enter the order (never thought it would reach FRV for a moment in a day like this) but I told myself it is making higher lows.

 

[martys]

Quote from Spydertrader:

No stones to be thrown here, just a different conclusion reached. On the day before a major USA Holiday, RTSX traded at the lowest volume levels out of all Final Universe Stocks with a volume of approximately 49,000 shares traded. The spread often sat around .10 with 400 share lots sitting on either the bid / ask throughout the day. In other words, a trader could have easily purchased 400 shares (or shorted) without moving the market a single cent. Such a purchase would have represented 1% of the shares traded for the entire day. At the other end of the spectrum, we see VPHM - trading 2.1 million shares today. While I agree the opening prints can often show few shares traded, I do not see how you have reached the conclusion that these stocks have "liquidity problems." I have often traded 1000 share lots, and have only rarely experienced significant slippage irrespective of brokerage firm used to place the trades.

- Spydertrader

Maybe this is just a bad conjecture. What if a much larger position need to be established for a fund say? I just think there will eventually be a size that people cannot do thing in one shot. Or maybe simply they want to average out the purchase price?