Spydertrader's Jack Hershey Equities Journal

[Trend Fader]

I had one trade a few years ago.. that was 50% of my account on a short.. and stock got acquired next day for 40% premium. Overnight 20% drawdown... if you can stomach something like that then so be it. It will happen just a matter of time.

The key to trading is making consistent gains, taking the least risk possible. I personally would rather risk less and make less.

The style of risk you are incorporating is called hyper swing trading... its ok if you have a small account.. but if it were to get over $100k.. I think most traders would become more prudent.

 

[Trend Fader]

I dont want to take away from your success at growing your account.. and it seems that u are having success with your stock selection, entries and exits... I just think that since you are doing this full time and might be your only source of income... one or two bad trades.. will wipe out almost all of your gains.

 

[Spydertrader]

Quote from Trend Fader:

The style of risk you are incorporating is called hyper swing trading... its ok if you have a small account.. but if it were to get over $100k.. I think most traders would become more prudent.

As one's account grows larger, it certainly makes sense to alter risk parameters accordingly. If I had an account size of one million dollars, I would of course reduce the total risk, and reduce the total portion of the account traded in any one equity. Nobody every suggested doing otherwise. A trader using $5000 to trade often takes greater risk than one trading a $500,000 account - simply out of necessity to grow the account.

Again, I never suggested the methods you employ lacked merit. I simply pointed out that based on a 15% gap down, they did not provide the level of protection required to offset a loss of that nature. Beyond the 18% to 20% overnight gap down, the methods DO provide the protection required to offset a catastrophic loss. However, this protection comes with a pricetag. That price tag is overall reduced gains and slower growth. For some traders (such as yourself) this tradeoff provides a certain level of comfort in addition to a smooth equity curve. Other traders, with a greater risk tolerance, may determine my methods too low a risk and manage their account accordingly.

What you may fail to realize is the very nature of The Jack Hershey Equities Method lends itself to risk aversion. While anything can (and often does) happen with respect to holding positions overnight, the methodology employed to cull the highest quality stocks, and the timing used to determine appropriate entry, greatly reduces the overall risk associated with trading in general, and the Hershey Equities in specific. In addition, the system chooses stocks with the highest "Money Velocity" in order to maximize gains. As a result, the risk parameters associated might seem counter intuitive to a seasoned veteran such as yourself. However, to those of us that have spent a great deal of time and effort towards understanding the theories behind the methodology, it makes little sense to limit ones potential profit without considering all the factors that may or may not increase or decrease overall risk. As a result, I continue to encourage every trader to determine on their own which method of risk and money management best suites their trading style and individual needs.

Again, I appreciate your comments and your contributions.

- Spydertrader

 

[Spydertrader]

Quote from acesheet:

Has anyone tried or read about anyone trying a weekly version of Jack's basic strategy?

While I can't recall any specific mention of trading Jack's Methods on a weekly basis, I did trade these methods using EOD data while working before moving to trading full time. Don Cameron's MSN web site has a few posts regarding this subject (see background links posted in the beginning of the Journal) and Jack himself discussed trading using EOD data while working to grow the account size.

Quote from acesheet:

Incidentally I've attached an *.IFF file that does a good job of using MSNBC's stock screener in finding the good quality stocks that Hershey Equities method demands. If you don't have it yet you'll need to download the Deluxe screener. Its a very good screener and easy to use.

Thanks for posting your MSN Screener Scan. I've used the MSN Screener in the past, and like its functionality. I'll give it a test drive when I have more time, and thanks again for your many contributions to the discussion.

- Spydertrader

 

[Spydertrader]

2005-05-10, Tuesday - Lists

Hershey Wealth-Lab Chartscript Culling Methodology
Hershey Chartscript Scans / Qcharts Culling / Stocktables.com Sort

Hot List

DCAI ELOS FORD MCRI SNDA TRGL USG XXIA

Dry Up Stocks

EXM EZPW MCRI SYNA XXIA

Hot List Stocks Scores

DCAI - 7
ELOS - 5
FORD - 7
MCRI - 7
SNDA - 7
TRGL - 7
USG - 7
XXIA - 0


Dry Up Stocks Scores

EXM - 0
EZPW - 2
MCRI - 7
SYNA - 7
XXIA - 0

Keep an Eye on These Stocks

EZPW (Attached)

ANTP & LB failed to make the Final Universe List due to Insufficient Float.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=745330>

 

[odelys]

Hi guys,

Spydertrader encouraged me to post my last two successful trades as of yesterday. I took TASR and SGTL as I didn't get more alerts before 11:30 ET.

Unfortunately, as I am in Europe, it is always the time between I leave the office and return home when the signals are occurring. That was exactly the same yesterday. When I was at home, TASR traded at 10.40 and SGTL @ 27.10. I took the trade in TASR although it seemed to be overbought with a stoch of about 94 and took a short in SGTL at around 27.

After an hour I came back to my computer and could not believe my eyes: SGTL had dropped like a rock and TASR didn't move in either direction. I took some of the profits in SGTL, put a limit at 25.65 in the market for the rest (was filled soon) and held the TASR position. 15 minutes before the closing bell, TASR was ready for take-off and I decided to keep half of the position overnight as FRV was exceeded already. So if TASR doesn't open with a dramatic downgap, I made 3 very positive out of 4 trades since I decided to trade this method.

Must be careful now not to be too euphoric.

Concerning your moneymanagement discussion, I can recommend this one

http://www.amazon.de/exec/obidos/AS...r=2-1/ref=sr_aps_prod_1_1/028-1053183-0279728

you will find it @ amazon.com too. Actually I haven't read it yet, but I know a lot of guys who argue that this is the ultimate book on MM. Larry Williams is one of these guys.

CU guys
Odelys

P.S.: Spydertrader, do you keep shorttrades overnight, too? And if yes, is FRV the condition to be met for this or what else?

 

[odelys]

Here I ve got a detailed opinion concerning "The Trading Game":

By Eugene on Tuesday, January 21, 2003 - 07:13 am:
I think that there is some misunderstanding of details as far as Fixed Ratio MM is concerned. One should look at the whole concept that Ryan Jones proposes, and not only at juggling of Delta.

First, the starting equity. Jones advises to add estimated drawdown to the margin, and then to double, tripple or even quadrupple this number. What it does is the marked decrease in the leverage. So let's say the margin is 7000 and DD 8000, then one should start trading one contract with 45000. In this case the leverage is really conservative and prevents bid drawdowns.

Second, if the strategy works, the leverage gets sharper. If your Delta is, say 5000, then you jump to trading 2 contracts with 50000, 3 contracts with 60000 etc. If trades are unprofitable, then you are back to more conservative leverage again. If, however, you catch a winning streak, then the number of contracts increases, and at some point the leverage becomes smaller (more conservative). And at some point, when you have enough capital to make a reasonable living, you jump to Fixed Fractional MM, when your risk is constant (say your capital is big enough and leverage of 50% makes you enough money). This means that Jones' MM is especially suitable for small traders.

Three. Drawdown management. Ryan Jones gives a few different ideas. My favourite is: when real drawdawn reaches an estimated one, start aggressively decreasing positions (see "Rate of Decrease" in his book for more details). I also use moving average of the equity, inspite of Jones not advising this. Again, if one uses Delta of 1/2 of the estimated drawdown, the number of contracts should not go down by more than 2 from the highest number(just come back to the math of the method and you'll see it). If this is exceeded, there is discrepancy between backtested results and real behavior of the system. It warrants agressive decrease in size in any case.

Four. Great point that Ryan Jones made in his book: diversification. That chapter is the mastership of the mathematical statistics. It must be read and re-read by everyone. He also gives an excellent discussion on systems development and backtesting.

In my opinion, "The Trading Game" is one of the best books on money management. I is not the final solution of every problem. But it gives plenty of mathematically based ideas for practical trading. Just re-read it again.

 

[Spydertrader]

Quote from odelys:

Spydertrader, do you keep shorttrades overnight, too? And if yes, is FRV the condition to be met for this or what else?

Again, congratulations on your trading success. May you continue to experience similar results as you progress through your review of the posts. I think you'll find your progress improves as you develop a greater understanding of the theories behind the methods. To answer your question, I rarely hold a short longer than intraday. As I have stated many times, The Jack Hershey Equities Method remains primarily a "long only" system. Although I have experienced a certain degree of success with shorting Hershey Equities, one should continue to focus on the long side until sufficient expertise has been developed. Again, I wish you continued success with your efforts, and I appreciate you sharing your success with the rest of us.

- Spydertrader

 

[odelys]

Thanks for your warm words, Spydertrader.

I am used to share my knowledge. For me, everything is a give-and-take.

Never say never, but today it seems like there will be no action. Let's say apart from the rest of my position in TASR which is > 11 right now

 

[Spydertrader]

Quote from odelys:

Thanks for your warm words, Spydertrader.

I am used to share my knowledge. For me, everything is a give-and-take.

Never say never, but today it seems like there will be no action. Let's say apart from the rest of my position in TASR which is > 11 right now

I sold my TASR @ $11.01 and currently hold a small position with EXM. I'll update later.

- Spydertrader