How To Get a 70% win ratio trading StockMarketsVane’s Swing Picks

Boring stuff first! The data and results presented in this post are not guaranteed to be accurate and are not an indication of future performance of anything. I am not a financial adviser, this is just a hobby for me. Read the Disclaimer if you have not done so yet.

I’ve been analyzing all 600+ picks published daily since the beginning of July on the Current Positions page trying to come up with a set of rules for entering and exiting these positions (This is the rules for BUY signals, reverse them for SELL signals):

  • Right before the end of the trading day go over the stock picks of the previous day, enter the trade only IF the stock is down 1% or more since the previous day close.
  • Review active positions every day just before market close(~15:50), if a position matches ANY of these, sell immediately:
  1. The position has a P/L of +2%
  2. The position has a P/L of -10%
  3. The position has been held for 20 days or more

 
That’s it. Note that this strategy is expecting that the stock is going through a short term retracement. An oversold(for BUY signals) or overbought(For Short signals) condition that will be followed shortly by a bounce back to its longer time frame trend. When doing these trades you will sometimes have the feeling that you are trying to catch a falling knife, stick to your sell rules!

The targets to sell on a +2% profit or -10% loss or the expiry of 20 days can be tweaked of course but for me those values seem to be the sweet spot.

Out of the 800+ picks, 203 were selected based on the enter criteria (stock is down more than 1% compared to previous day). Of these selected trades, 75% were profitable. You can see more interesting stats in the table below.

Note that the number published below use the close price of the day, if you would have bought/sold a few minutes before the close you would most likely not have gotten the same price but the difference should be negligible.

 
This table will get updated from time to time to show the most up to date results.
 

Summary (from Tue Jul 01 00:00:00 EDT 2014 to Thu Nov 20 22:24:31 EST 2014)
Total published picks 834
Total selected picks 203
Total winners 154(75%)
Total long winners 60(76%)
Total short winners 94(75%)
Average transaction Profit/Loss 1.47%
Average Profit/Loss for winners 4.25%
Average Profit/Loss for loosers -7.25%
Average Profit/Loss for long positions winners 4.28%
Average Profit/Loss for short positions winners 4.23%
Profit Factor 1.84%
Total Profit/Loss when investing 1000$ per position 2997.60$


Transactions
Symbol Signal Entry Date Entry Price Exit Date Exit Price P/L
FNSR SHORT 2014-07-02 20.40 2014-07-08 19.98 2.10%
FST SHORT 2014-07-02 2.31 2014-07-07 2.23 3.58%
PCYC SHORT 2014-07-03 94.28 2014-07-17 91.50 3.03%
BGCP BUY 2014-07-07 7.43 2014-07-18 7.72 3.90%
DNR BUY 2014-07-07 17.75 2014-08-04 17.23 -2.92%
JASO BUY 2014-07-07 9.92 2014-07-15 10.12 2.01%
ACT BUY 2014-07-08 216.89 2014-08-05 214.67 -1.02%
DEE.TO BUY 2014-07-08 4.01 2014-08-06 3.81 -4.98%
ETE BUY 2014-07-08 56.82 2014-07-22 58.75 3.39%
FANG BUY 2014-07-08 85.97 2014-07-21 87.99 2.34%
FB BUY 2014-07-08 62.76 2014-07-09 64.97 3.52%
IGT BUY 2014-07-08 15.20 2014-07-16 16.92 11.31%
JKS BUY 2014-07-08 26.99 2014-07-15 27.66 2.48%
MTDR BUY 2014-07-08 26.81 2014-07-22 27.40 2.20%
NKTR BUY 2014-07-08 12.15 2014-07-11 12.58 3.53%
NOW BUY 2014-07-08 55.88 2014-07-10 57.50 2.89%
PGH BUY 2014-07-08 6.85 2014-08-05 6.21 -9.34%
PVA BUY 2014-07-08 15.63 2014-07-31 13.02 -16.69%
SPWR BUY 2014-07-08 37.06 2014-07-09 38.43 3.69%
TRLA BUY 2014-07-08 41.66 2014-07-24 53.74 28.96%
VNDA BUY 2014-07-08 14.10 2014-07-09 14.46 2.55%
WDAY BUY 2014-07-08 81.79 2014-07-30 86.00 5.14%
SLB BUY 2014-07-10 115.40 2014-08-07 107.01 -7.27%
CNQ BUY 2014-07-11 44.34 2014-07-22 45.65 2.95%
HK BUY 2014-07-11 6.78 2014-07-23 6.99 3.09%
TDC SHORT 2014-07-11 41.24 2014-08-08 42.48 -2.91%
PAAS BUY 2014-07-15 14.73 2014-07-17 15.46 4.95%
CUM.TO BUY 2014-07-16 2.73 2014-07-22 2.83 3.66%
UBS SHORT 2014-07-16 18.72 2014-07-17 18.32 2.18%
GILD BUY 2014-07-17 85.07 2014-07-18 89.18 4.84%
ANS.TO SHORT 2014-07-18 2.73 2014-08-05 2.65 3.01%
NQ SHORT 2014-07-21 5.42 2014-07-23 6.55 -17.25%
ARTX SHORT 2014-07-22 3.66 2014-07-30 3.58 2.23%
BMRN SHORT 2014-07-23 62.08 2014-07-25 60.60 2.44%
GALE SHORT 2014-07-23 3.04 2014-07-24 2.94 3.40%
MM SHORT 2014-07-23 3.83 2014-07-24 3.67 4.35%
SALE SHORT 2014-07-23 25.03 2014-07-31 24.45 2.33%
USG SHORT 2014-07-23 28.81 2014-07-24 27.60 4.38%
AEGR SHORT 2014-07-25 30.00 2014-07-30 35.65 -15.84%
CRM SHORT 2014-07-25 54.89 2014-08-01 53.48 2.63%
TWGP SHORT 2014-07-25 2.10 2014-08-22 2.10 0.00%
PXLW BUY 2014-07-28 7.97 2014-07-29 8.17 2.50%
FE SHORT 2014-07-28 32.41 2014-07-30 31.65 2.40%
TSL SHORT 2014-07-29 11.54 2014-07-31 11.21 2.94%
VLO SHORT 2014-07-29 49.85 2014-08-26 53.77 -7.29%
ADM BUY 2014-07-30 46.74 2014-08-05 48.56 3.89%
USU BUY 2014-07-30 60.19 2014-07-31 62.05 3.07%
ARWR SHORT 2014-07-30 13.18 2014-07-31 12.65 4.18%
YNDX SHORT 2014-07-30 31.25 2014-07-31 30.28 3.20%
GPRE BUY 2014-07-31 37.49 2014-08-01 39.41 5.12%
PPC BUY 2014-07-31 27.96 2014-08-01 28.82 3.07%
PXT.TO BUY 2014-07-31 14.21 2014-08-06 14.55 2.39%
AMD SHORT 2014-07-31 3.91 2014-08-28 4.14 -5.55%
BGCP BUY 2014-08-01 7.70 2014-08-18 7.90 2.59%
CNR.TO BUY 2014-08-01 72.11 2014-08-14 74.37 3.13%
TRP.TO BUY 2014-08-01 53.98 2014-08-14 55.29 2.42%
WNR BUY 2014-08-01 38.41 2014-08-04 39.23 2.13%
GLNG BUY 2014-08-06 59.76 2014-08-08 60.96 2.00%
HBM.TO BUY 2014-08-06 11.00 2014-08-20 11.36 3.27%
TRLA BUY 2014-08-06 57.95 2014-08-15 59.14 2.05%
Z BUY 2014-08-06 138.30 2014-08-20 141.32 2.18%
ABC BUY 2014-08-07 74.96 2014-08-14 76.62 2.21%
AKRX BUY 2014-08-07 33.41 2014-08-08 34.32 2.72%
DEPO SHORT 2014-08-07 11.99 2014-08-19 14.94 -19.74%
FOXA SHORT 2014-08-07 33.96 2014-09-05 36.15 -6.05%
TEX SHORT 2014-08-08 35.48 2014-09-08 36.72 -3.37%
CDE SHORT 2014-08-11 8.35 2014-08-14 8.07 3.46%
MTZ SHORT 2014-08-12 28.81 2014-08-13 27.98 2.96%
ALK SHORT 2014-08-14 45.20 2014-09-12 47.27 -4.37%
GNW SHORT 2014-08-14 13.45 2014-09-09 13.11 2.59%
MY SHORT 2014-08-14 3.07 2014-08-27 2.94 4.42%
BAR.TO BUY 2014-08-15 1.82 2014-08-18 1.92 5.49%
PNE.V BUY 2014-08-15 1.73 2014-08-20 1.84 6.35%
BAS SHORT 2014-08-15 24.04 2014-08-20 23.42 2.64%
S.TO SHORT 2014-08-15 4.06 2014-09-10 3.89 4.37%
XLNX SHORT 2014-08-15 42.13 2014-09-15 41.97 0.38%
DWA SHORT 2014-08-18 22.55 2014-08-19 21.93 2.82%
GT SHORT 2014-08-18 25.43 2014-09-09 24.83 2.41%
LYV SHORT 2014-08-18 21.77 2014-09-16 24.40 -10.77%
SPLK SHORT 2014-08-18 43.48 2014-08-21 42.21 3.00%
BXE.TO SHORT 2014-08-19 8.72 2014-08-20 8.52 2.46%
CBI SHORT 2014-08-20 62.38 2014-09-15 60.89 2.44%
CMI SHORT 2014-08-20 147.28 2014-08-26 144.17 2.15%
MYL SHORT 2014-08-20 48.59 2014-09-04 46.94 3.51%
BIDU BUY 2014-08-22 214.19 2014-09-02 224.80 4.95%
XCO SHORT 2014-08-25 4.54 2014-09-19 4.40 3.18%
KMI BUY 2014-08-26 40.06 2014-09-24 38.48 -3.94%
GGB SHORT 2014-08-26 5.93 2014-08-28 5.77 2.77%
MM SHORT 2014-08-26 2.50 2014-08-27 2.42 3.30%
SPLK SHORT 2014-08-26 46.22 2014-08-28 45.29 2.05%
VVUS SHORT 2014-08-26 4.28 2014-08-28 4.14 3.38%
HA BUY 2014-09-03 15.26 2014-09-10 15.60 2.22%
THC BUY 2014-09-03 60.10 2014-09-11 62.84 4.55%
GTAT BUY 2014-09-04 16.72 2014-09-08 17.15 2.57%
PBF BUY 2014-09-04 27.39 2014-09-05 28.03 2.33%
DEE.TO BUY 2014-09-05 4.12 2014-09-19 3.62 -12.13%
PBF BUY 2014-09-08 27.53 2014-09-12 24.74 -10.13%
SLCA BUY 2014-09-08 65.05 2014-09-10 69.41 6.70%
PBR BUY 2014-09-09 17.83 2014-09-23 15.92 -10.71%
BKW BUY 2014-09-11 30.82 2014-10-09 29.35 -4.76%
CODE BUY 2014-09-15 21.58 2014-09-16 22.68 5.09%
LVLT BUY 2014-09-15 44.06 2014-09-16 45.24 2.67%
TSL BUY 2014-09-16 13.50 2014-09-17 14.47 7.18%
NUS SHORT 2014-09-18 44.09 2014-09-22 42.19 4.50%
CCE SHORT 2014-09-19 46.27 2014-09-23 45.06 2.68%
ISIL BUY 2014-09-22 15.11 2014-10-06 13.49 -10.68%
UTIW BUY 2014-09-22 10.89 2014-10-20 10.33 -5.14%
DHX.TO BUY 2014-09-23 7.84 2014-09-24 8.07 2.93%
ODP BUY 2014-09-23 5.36 2014-09-25 5.31 -0.93%
INFN BUY 2014-09-24 10.79 2014-10-09 9.68 -10.28%
SPLS BUY 2014-09-25 12.59 2014-10-23 12.52 -0.55%
ING BUY 2014-09-29 14.16 2014-10-27 14.15 -0.07%
KERX SHORT 2014-10-01 14.39 2014-10-03 16.10 -10.62%
MM SHORT 2014-10-03 2.06 2014-10-06 1.94 6.18%
HLF SHORT 2014-10-06 47.30 2014-10-07 45.68 3.54%
PIR SHORT 2014-10-06 12.25 2014-10-07 11.82 3.63%
SFUN SHORT 2014-10-06 10.24 2014-10-14 9.80 4.48%
SHLD SHORT 2014-10-06 27.08 2014-10-09 24.51 10.47%
PT SHORT 2014-10-07 2.09 2014-10-08 2.03 2.95%
CIG SHORT 2014-10-08 7.07 2014-10-09 6.86 3.06%
VNET SHORT 2014-10-08 21.54 2014-10-09 19.39 11.08%
DO SHORT 2014-10-13 35.60 2014-11-03 34.72 2.55%
GILD BUY 2014-10-14 97.18 2014-10-17 100.75 3.67%
NI BUY 2014-10-14 39.11 2014-10-20 40.74 4.16%
LO BUY 2014-10-15 58.72 2014-10-21 60.76 3.47%
MO BUY 2014-10-15 45.53 2014-10-21 47.02 3.27%
PEP BUY 2014-10-15 91.76 2014-10-21 93.73 2.13%
RAI BUY 2014-10-15 57.34 2014-10-20 59.13 3.12%
THI.TO BUY 2014-10-15 86.73 2014-10-24 89.12 2.75%
CDE SHORT 2014-10-15 4.88 2014-10-17 4.78 2.09%
PAAS SHORT 2014-10-15 10.78 2014-10-17 10.55 2.18%
BDX BUY 2014-10-16 120.78 2014-10-21 123.31 2.09%
DTE BUY 2014-10-16 76.88 2014-10-20 78.64 2.28%
CMLS SHORT 2014-10-17 3.70 2014-10-30 3.62 2.20%
EOG SHORT 2014-10-20 92.76 2014-10-27 88.43 4.89%
FCEL SHORT 2014-10-20 1.84 2014-10-21 1.77 3.95%
GTE.TO SHORT 2014-10-20 5.55 2014-10-24 5.42 2.39%
GTI SHORT 2014-10-20 4.67 2014-10-22 4.54 2.86%
HP SHORT 2014-10-20 87.47 2014-10-27 82.28 6.30%
PEIX SHORT 2014-10-20 11.55 2014-10-27 11.26 2.57%
SUNE SHORT 2014-10-20 17.90 2014-11-03 20.01 -10.54%
TOG.TO SHORT 2014-10-20 11.79 2014-10-22 11.25 4.80%
YGE SHORT 2014-10-20 2.95 2014-10-22 2.83 4.24%
BEAV SHORT 2014-10-21 79.99 2014-10-22 74.47 7.41%
KMX SHORT 2014-10-21 48.80 2014-10-27 54.77 -10.90%
LVLT SHORT 2014-10-21 42.21 2014-10-31 46.91 -10.01%
SPWR SHORT 2014-10-21 31.76 2014-10-22 30.49 4.16%
VSH SHORT 2014-10-21 13.94 2014-10-22 13.61 2.42%
PRW.TO SHORT 2014-10-22 1.08 2014-10-28 1.00 8.00%
ALU SHORT 2014-10-23 2.57 2014-10-24 2.51 2.39%
AXAS SHORT 2014-10-23 4.13 2014-10-24 4.04 2.22%
BXE.TO SHORT 2014-10-23 5.71 2014-10-24 5.48 4.37%
CKE.TO SHORT 2014-10-23 1.64 2014-10-27 1.51 8.60%
CNQ.TO SHORT 2014-10-23 39.55 2014-10-27 37.95 4.21%
COS.TO SHORT 2014-10-23 17.98 2014-10-27 17.05 5.45%
ERF.TO SHORT 2014-10-23 17.33 2014-10-24 16.90 2.54%
FANG SHORT 2014-10-23 67.22 2014-10-27 64.13 4.81%
HAL SHORT 2014-10-23 55.85 2014-10-27 52.39 6.60%
NBR SHORT 2014-10-23 18.99 2014-10-27 17.48 8.63%
P SHORT 2014-10-23 23.12 2014-10-24 20.00 15.60%
PD.TO SHORT 2014-10-23 10.14 2014-10-27 9.13 11.06%
PDS SHORT 2014-10-23 9.03 2014-10-27 8.11 11.34%
SAVE SHORT 2014-10-23 63.52 2014-10-28 71.06 -10.61%
SEAS SHORT 2014-10-23 18.55 2014-11-12 16.85 10.08%
SLCA SHORT 2014-10-23 50.64 2014-10-27 47.60 6.38%
TRLA SHORT 2014-10-23 46.09 2014-10-24 44.93 2.58%
WDC SHORT 2014-10-23 90.58 2014-11-03 100.75 -10.08%
XEC SHORT 2014-10-23 111.23 2014-10-27 105.68 5.25%
XRX SHORT 2014-10-23 12.78 2014-11-20 13.54 -5.61%
SAN SHORT 2014-10-24 8.93 2014-10-27 8.70 2.64%
TYC SHORT 2014-10-24 41.59 2014-11-20 41.31 0.67%
HCBK SHORT 2014-10-28 9.32 2014-11-20 9.78 -4.70%
CNX SHORT 2014-10-29 36.00 2014-11-07 39.98 -9.93%
JNPR SHORT 2014-10-29 20.95 2014-11-11 20.28 3.35%
ATVI SHORT 2014-10-30 19.58 2014-11-20 21.11 -7.24%
FCEL SHORT 2014-10-31 2.02 2014-11-12 1.89 6.87%
OCN SHORT 2014-10-31 23.56 2014-11-03 22.72 3.69%
SPWR SHORT 2014-11-03 32.28 2014-11-04 31.36 2.93%
AKRX BUY 2014-11-05 41.68 2014-11-07 36.59 -12.21%
SHLD BUY 2014-11-05 33.25 2014-11-07 42.81 28.71%
CNQ.TO SHORT 2014-11-07 40.87 2014-11-20 42.15 -3.03%
CR.TO SHORT 2014-11-07 7.99 2014-11-10 7.55 5.82%
PEY.TO SHORT 2014-11-07 35.10 2014-11-20 36.63 -4.17%
NCT SHORT 2014-11-10 4.73 2014-11-20 4.80 -1.25%
PTK.V SHORT 2014-11-10 1.01 2014-11-12 1.15 -12.17%
CNE.TO SHORT 2014-11-11 4.13 2014-11-13 3.67 12.53%
OGC.TO SHORT 2014-11-11 2.01 2014-11-17 2.25 -10.66%
TRMB SHORT 2014-11-11 28.46 2014-11-20 28.24 0.77%
TA.TO SHORT 2014-11-12 11.25 2014-11-20 11.50 -2.17%
LVS SHORT 2014-11-13 62.83 2014-11-20 62.59 0.38%
S.TO SHORT 2014-11-13 2.71 2014-11-19 2.61 3.43%
MPEL SHORT 2014-11-14 26.53 2014-11-17 25.97 2.15%
P SHORT 2014-11-14 21.51 2014-11-17 20.16 6.69%
SWC SHORT 2014-11-14 13.17 2014-11-20 12.97 1.54%
VIAB SHORT 2014-11-14 72.96 2014-11-20 73.80 -1.13%
ALXN BUY 2014-11-17 186.78 2014-11-18 192.37 2.99%
MU BUY 2014-11-17 32.29 2014-11-19 32.96 2.07%
BTO.TO SHORT 2014-11-17 1.98 2014-11-18 2.18 -9.17%
PAAS SHORT 2014-11-17 10.26 2014-11-20 10.67 -3.84%
AUY SHORT 2014-11-18 4.23 2014-11-19 3.96 7.06%
EXH SHORT 2014-11-18 37.23 2014-11-20 37.52 -0.77%
P.TO SHORT 2014-11-18 5.00 2014-11-19 4.67 7.06%
VIPS BUY 2014-11-19 22.44 2014-11-20 22.64 0.89%

I also built a simple 100000$ test portfolio to get a better idea on how it would have performed, the portfolio has 10 positions max and allocates 10% to each positions, if the portfolio has 10 positions open, all picks are ignored until an open position is sold. It returned 13.69% since July compared to 3.52% for SPY for the same time period which is pretty nice.

StockMarketsVane’s Trend and Swing portfolios don’t benefit from this edge because they are built to have unconditional orders posted the day before. I think both approach can be effective but Swing portfolios can certainly time trades better by looking at the current day price action.

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Sectors Performance After Correction

Tuesday August 5th SPY was down more than 3% in a period of 10 days, so I wondered which sectors were the best performers in the past after such an event. Here are the results from January 1 2009,  how each sector ETFs fared on average, 10 days after a 3% SPY correction :

Top Average Returns after 10 days for the last 32 occurrences
2.20% XLY SPDR FUND CONSUMER DISC
1.77% XLB SPDR FUND MATERIALS SEL
1.67% XLK TECHNOLOGY SELECT SECTO
1.48% XLI SELECT SECTOR INDUSTRIA
1.34% XLP SPDR FUND CONSUMER STAP
1.31% XLV SELECT SECTOR HEALTH CA
1.14% XLE ENERGY SELECT SECTOR SP
0.81% XLU SELECT SECTOR UTI SELEC
0.63% XLF SELECT STR FINANCIAL SE

What sectors come in the top 3 best performers the most often? :

Top performer by occurrences for 32 occurrences
15 XLY SPDR FUND CONSUMER DISC
14 XLB SPDR FUND MATERIALS SEL
12 XLU SELECT SECTOR UTI SELEC
11 XLP SPDR FUND CONSUMER STAP
10 XLI SELECT SECTOR INDUSTRIA
9 XLV SELECT SECTOR HEALTH CA
9 XLE ENERGY SELECT SECTOR SP
7 XLK TECHNOLOGY SELECT SECTO
6 XLF SELECT STR FINANCIAL SE

Here is the full data dump for all periods:

Wed Jan 14 00:00:00 EST 2009 SPY was down -6.50% in 10 days, sector performance 10 days later
2.89% XLE ENERGY SELECT SECTOR SP
2.80% XLU SELECT SECTOR UTI SELEC
2.22% XLV SELECT SECTOR HEALTH CA
-0.40% XLK TECHNOLOGY SELECT SECTO
-2.16% XLP SPDR FUND CONSUMER STAP
-2.72% XLB SPDR FUND MATERIALS SEL
-3.01% XLY SPDR FUND CONSUMER DISC
-4.13% XLI SELECT SECTOR INDUSTRIA
-11.66% XLF SELECT STR FINANCIAL SE
Tue Feb 10 00:00:00 EST 2009 SPY was down -4.89% in 10 days, sector performance 10 days later
-5.06% XLP SPDR FUND CONSUMER STAP
-7.42% XLK TECHNOLOGY SELECT SECTO
-7.68% XLY SPDR FUND CONSUMER DISC
-8.54% XLF SELECT STR FINANCIAL SE
-9.23% XLB SPDR FUND MATERIALS SEL
-9.38% XLV SELECT SECTOR HEALTH CA
-10.83% XLU SELECT SECTOR UTI SELEC
-10.96% XLE ENERGY SELECT SECTOR SP
-14.06% XLI SELECT SECTOR INDUSTRIA
Thu Feb 26 00:00:00 EST 2009 SPY was down -9.61% in 10 days, sector performance 10 days later
3.98% XLB SPDR FUND MATERIALS SEL
3.37% XLK TECHNOLOGY SELECT SECTO
3.22% XLY SPDR FUND CONSUMER DISC
0.79% XLV SELECT SECTOR HEALTH CA
0.73% XLF SELECT STR FINANCIAL SE
0.35% XLP SPDR FUND CONSUMER STAP
-1.54% XLE ENERGY SELECT SECTOR SP
-1.65% XLI SELECT SECTOR INDUSTRIA
-8.27% XLU SELECT SECTOR UTI SELEC
Thu May 21 00:00:00 EDT 2009 SPY was down -4.05% in 10 days, sector performance 10 days later
9.27% XLI SELECT SECTOR INDUSTRIA
8.46% XLY SPDR FUND CONSUMER DISC
7.99% XLK TECHNOLOGY SELECT SECTO
6.99% XLE ENERGY SELECT SECTOR SP
5.70% XLF SELECT STR FINANCIAL SE
5.19% XLU SELECT SECTOR UTI SELEC
4.03% XLP SPDR FUND CONSUMER STAP
3.78% XLB SPDR FUND MATERIALS SEL
0.98% XLV SELECT SECTOR HEALTH CA
Wed Jun 17 00:00:00 EDT 2009 SPY was down -3.15% in 10 days, sector performance 10 days later
0.94% XLV SELECT SECTOR HEALTH CA
0.04% XLP SPDR FUND CONSUMER STAP
-0.21% XLU SELECT SECTOR UTI SELEC
-1.20% XLF SELECT STR FINANCIAL SE
-1.27% XLK TECHNOLOGY SELECT SECTO
-3.45% XLB SPDR FUND MATERIALS SEL
-3.54% XLY SPDR FUND CONSUMER DISC
-4.12% XLI SELECT SECTOR INDUSTRIA
-7.95% XLE ENERGY SELECT SECTOR SP
Thu Jul 09 00:00:00 EDT 2009 SPY was down -4.24% in 10 days, sector performance 10 days later
17.58% XLB SPDR FUND MATERIALS SEL
13.78% XLE ENERGY SELECT SECTOR SP
12.87% XLY SPDR FUND CONSUMER DISC
12.81% XLI SELECT SECTOR INDUSTRIA
12.55% XLK TECHNOLOGY SELECT SECTO
10.40% XLF SELECT STR FINANCIAL SE
9.72% XLU SELECT SECTOR UTI SELEC
8.30% XLV SELECT SECTOR HEALTH CA
6.65% XLP SPDR FUND CONSUMER STAP
Thu Oct 01 00:00:00 EDT 2009 SPY was down -3.48% in 10 days, sector performance 10 days later
12.92% XLE ENERGY SELECT SECTOR SP
7.76% XLB SPDR FUND MATERIALS SEL
6.58% XLF SELECT STR FINANCIAL SE
5.43% XLY SPDR FUND CONSUMER DISC
5.37% XLI SELECT SECTOR INDUSTRIA
4.51% XLP SPDR FUND CONSUMER STAP
4.29% XLK TECHNOLOGY SELECT SECTO
3.46% XLV SELECT SECTOR HEALTH CA
2.98% XLU SELECT SECTOR UTI SELEC
Wed Oct 28 00:00:00 EDT 2009 SPY was down -4.83% in 10 days, sector performance 10 days later
7.91% XLB SPDR FUND MATERIALS SEL
6.72% XLI SELECT SECTOR INDUSTRIA
6.33% XLY SPDR FUND CONSUMER DISC
5.27% XLV SELECT SECTOR HEALTH CA
4.47% XLK TECHNOLOGY SELECT SECTO
3.83% XLF SELECT STR FINANCIAL SE
2.78% XLP SPDR FUND CONSUMER STAP
1.73% XLE ENERGY SELECT SECTOR SP
1.46% XLU SELECT SECTOR UTI SELEC
Fri Jan 22 00:00:00 EST 2010 SPY was down -4.67% in 10 days, sector performance 10 days later
-1.29% XLP SPDR FUND CONSUMER STAP
-1.48% XLY SPDR FUND CONSUMER DISC
-3.09% XLV SELECT SECTOR HEALTH CA
-3.13% XLK TECHNOLOGY SELECT SECTO
-3.37% XLI SELECT SECTOR INDUSTRIA
-3.68% XLF SELECT STR FINANCIAL SE
-4.12% XLU SELECT SECTOR UTI SELEC
-4.54% XLE ENERGY SELECT SECTOR SP
-5.18% XLB SPDR FUND MATERIALS SEL
Mon Feb 08 00:00:00 EST 2010 SPY was down -3.12% in 10 days, sector performance 10 days later
7.10% XLF SELECT STR FINANCIAL SE
7.06% XLI SELECT SECTOR INDUSTRIA
6.40% XLY SPDR FUND CONSUMER DISC
5.23% XLB SPDR FUND MATERIALS SEL
4.58% XLP SPDR FUND CONSUMER STAP
4.16% XLE ENERGY SELECT SECTOR SP
3.52% XLK TECHNOLOGY SELECT SECTO
2.93% XLU SELECT SECTOR UTI SELEC
2.24% XLV SELECT SECTOR HEALTH CA
Wed May 05 00:00:00 EDT 2010 SPY was down -3.47% in 10 days, sector performance 10 days later
-3.94% XLP SPDR FUND CONSUMER STAP
-5.31% XLU SELECT SECTOR UTI SELEC
-7.06% XLK TECHNOLOGY SELECT SECTO
-7.17% XLV SELECT SECTOR HEALTH CA
-8.26% XLY SPDR FUND CONSUMER DISC
-8.65% XLI SELECT SECTOR INDUSTRIA
-8.94% XLB SPDR FUND MATERIALS SEL
-10.13% XLE ENERGY SELECT SECTOR SP
-10.59% XLF SELECT STR FINANCIAL SE
Thu May 20 00:00:00 EDT 2010 SPY was down -3.34% in 10 days, sector performance 10 days later
-0.70% XLU SELECT SECTOR UTI SELEC
-0.83% XLY SPDR FUND CONSUMER DISC
-0.93% XLK TECHNOLOGY SELECT SECTO
-1.00% XLV SELECT SECTOR HEALTH CA
-2.03% XLE ENERGY SELECT SECTOR SP
-2.45% XLP SPDR FUND CONSUMER STAP
-2.63% XLF SELECT STR FINANCIAL SE
-3.54% XLB SPDR FUND MATERIALS SEL
-4.51% XLI SELECT SECTOR INDUSTRIA
Mon Jun 28 00:00:00 EDT 2010 SPY was down -3.99% in 10 days, sector performance 10 days later
3.37% XLU SELECT SECTOR UTI SELEC
3.15% XLB SPDR FUND MATERIALS SEL
2.75% XLP SPDR FUND CONSUMER STAP
2.45% XLE ENERGY SELECT SECTOR SP
1.93% XLF SELECT STR FINANCIAL SE
1.90% XLK TECHNOLOGY SELECT SECTO
1.40% XLY SPDR FUND CONSUMER DISC
1.14% XLI SELECT SECTOR INDUSTRIA
0.82% XLV SELECT SECTOR HEALTH CA
Fri Aug 13 00:00:00 EDT 2010 SPY was down -3.94% in 10 days, sector performance 10 days later
-0.09% XLU SELECT SECTOR UTI SELEC
-1.24% XLB SPDR FUND MATERIALS SEL
-1.26% XLP SPDR FUND CONSUMER STAP
-1.95% XLY SPDR FUND CONSUMER DISC
-2.39% XLK TECHNOLOGY SELECT SECTO
-3.05% XLV SELECT SECTOR HEALTH CA
-3.74% XLI SELECT SECTOR INDUSTRIA
-3.76% XLE ENERGY SELECT SECTOR SP
-4.47% XLF SELECT STR FINANCIAL SE
Mon Aug 30 00:00:00 EDT 2010 SPY was down -3.90% in 10 days, sector performance 10 days later
9.82% XLF SELECT STR FINANCIAL SE
8.68% XLY SPDR FUND CONSUMER DISC
8.16% XLI SELECT SECTOR INDUSTRIA
7.70% XLK TECHNOLOGY SELECT SECTO
7.50% XLB SPDR FUND MATERIALS SEL
7.12% XLV SELECT SECTOR HEALTH CA
6.46% XLE ENERGY SELECT SECTOR SP
5.02% XLP SPDR FUND CONSUMER STAP
2.15% XLU SELECT SECTOR UTI SELEC
Wed Nov 17 00:00:00 EST 2010 SPY was down -3.30% in 10 days, sector performance 10 days later
7.39% XLB SPDR FUND MATERIALS SEL
6.67% XLE ENERGY SELECT SECTOR SP
6.34% XLI SELECT SECTOR INDUSTRIA
4.64% XLY SPDR FUND CONSUMER DISC
4.04% XLK TECHNOLOGY SELECT SECTO
3.58% XLF SELECT STR FINANCIAL SE
1.80% XLV SELECT SECTOR HEALTH CA
1.40% XLP SPDR FUND CONSUMER STAP
0.67% XLU SELECT SECTOR UTI SELEC
Wed Mar 16 00:00:00 EDT 2011 SPY was down -5.46% in 10 days, sector performance 10 days later
8.13% XLE ENERGY SELECT SECTOR SP
8.13% XLB SPDR FUND MATERIALS SEL
6.54% XLI SELECT SECTOR INDUSTRIA
5.59% XLK TECHNOLOGY SELECT SECTO
4.77% XLV SELECT SECTOR HEALTH CA
3.96% XLY SPDR FUND CONSUMER DISC
3.73% XLP SPDR FUND CONSUMER STAP
3.08% XLF SELECT STR FINANCIAL SE
2.85% XLU SELECT SECTOR UTI SELEC
Fri Jun 10 00:00:00 EDT 2011 SPY was down -4.42% in 10 days, sector performance 10 days later
2.93% XLY SPDR FUND CONSUMER DISC
1.98% XLI SELECT SECTOR INDUSTRIA
0.53% XLF SELECT STR FINANCIAL SE
0.40% XLK TECHNOLOGY SELECT SECTO
0.21% XLU SELECT SECTOR UTI SELEC
0.15% XLV SELECT SECTOR HEALTH CA
-0.10% XLB SPDR FUND MATERIALS SEL
-0.51% XLP SPDR FUND CONSUMER STAP
-2.75% XLE ENERGY SELECT SECTOR SP
Tue Aug 02 00:00:00 EDT 2011 SPY was down -5.39% in 10 days, sector performance 10 days later
0.85% XLU SELECT SECTOR UTI SELEC
-0.29% XLP SPDR FUND CONSUMER STAP
-1.98% XLV SELECT SECTOR HEALTH CA
-3.92% XLK TECHNOLOGY SELECT SECTO
-4.21% XLY SPDR FUND CONSUMER DISC
-5.83% XLI SELECT SECTOR INDUSTRIA
-5.93% XLB SPDR FUND MATERIALS SEL
-7.91% XLE ENERGY SELECT SECTOR SP
-9.33% XLF SELECT STR FINANCIAL SE
Thu Aug 18 00:00:00 EDT 2011 SPY was down -4.63% in 10 days, sector performance 10 days later
4.45% XLB SPDR FUND MATERIALS SEL
4.37% XLY SPDR FUND CONSUMER DISC
4.30% XLV SELECT SECTOR HEALTH CA
4.27% XLI SELECT SECTOR INDUSTRIA
2.85% XLE ENERGY SELECT SECTOR SP
2.33% XLK TECHNOLOGY SELECT SECTO
2.18% XLP SPDR FUND CONSUMER STAP
2.14% XLU SELECT SECTOR UTI SELEC
1.29% XLF SELECT STR FINANCIAL SE
Mon Sep 12 00:00:00 EDT 2011 SPY was down -3.86% in 10 days, sector performance 10 days later
3.53% XLK TECHNOLOGY SELECT SECTO
2.73% XLY SPDR FUND CONSUMER DISC
2.20% XLU SELECT SECTOR UTI SELEC
1.27% XLV SELECT SECTOR HEALTH CA
1.14% XLI SELECT SECTOR INDUSTRIA
0.73% XLP SPDR FUND CONSUMER STAP
-0.88% XLF SELECT STR FINANCIAL SE
-3.29% XLB SPDR FUND MATERIALS SEL
-5.31% XLE ENERGY SELECT SECTOR SP
Wed Sep 28 00:00:00 EDT 2011 SPY was down -5.17% in 10 days, sector performance 10 days later
7.25% XLE ENERGY SELECT SECTOR SP
7.12% XLB SPDR FUND MATERIALS SEL
6.10% XLI SELECT SECTOR INDUSTRIA
5.31% XLK TECHNOLOGY SELECT SECTO
5.13% XLY SPDR FUND CONSUMER DISC
4.57% XLF SELECT STR FINANCIAL SE
3.20% XLP SPDR FUND CONSUMER STAP
2.00% XLV SELECT SECTOR HEALTH CA
0.59% XLU SELECT SECTOR UTI SELEC
Wed Nov 09 00:00:00 EST 2011 SPY was down -4.25% in 10 days, sector performance 10 days later
-1.46% XLP SPDR FUND CONSUMER STAP
-3.46% XLU SELECT SECTOR UTI SELEC
-3.93% XLV SELECT SECTOR HEALTH CA
-4.74% XLY SPDR FUND CONSUMER DISC
-4.82% XLI SELECT SECTOR INDUSTRIA
-6.17% XLK TECHNOLOGY SELECT SECTO
-7.50% XLB SPDR FUND MATERIALS SEL
-8.29% XLE ENERGY SELECT SECTOR SP
-8.46% XLF SELECT STR FINANCIAL SE
Fri Nov 25 00:00:00 EST 2011 SPY was down -8.14% in 10 days, sector performance 10 days later
8.57% XLF SELECT STR FINANCIAL SE
7.98% XLY SPDR FUND CONSUMER DISC
7.39% XLE ENERGY SELECT SECTOR SP
7.07% XLK TECHNOLOGY SELECT SECTO
7.02% XLI SELECT SECTOR INDUSTRIA
5.98% XLB SPDR FUND MATERIALS SEL
5.39% XLV SELECT SECTOR HEALTH CA
4.44% XLP SPDR FUND CONSUMER STAP
3.79% XLU SELECT SECTOR UTI SELEC
Fri Dec 16 00:00:00 EST 2011 SPY was down -3.66% in 10 days, sector performance 10 days later
7.65% XLE ENERGY SELECT SECTOR SP
6.73% XLB SPDR FUND MATERIALS SEL
6.06% XLI SELECT SECTOR INDUSTRIA
6.06% XLF SELECT STR FINANCIAL SE
4.66% XLV SELECT SECTOR HEALTH CA
4.64% XLY SPDR FUND CONSUMER DISC
3.60% XLK TECHNOLOGY SELECT SECTO
2.85% XLP SPDR FUND CONSUMER STAP
1.73% XLU SELECT SECTOR UTI SELEC
Tue Apr 10 00:00:00 EDT 2012 SPY was down -3.73% in 10 days, sector performance 10 days later
4.48% XLB SPDR FUND MATERIALS SEL
3.59% XLI SELECT SECTOR INDUSTRIA
3.00% XLU SELECT SECTOR UTI SELEC
2.85% XLY SPDR FUND CONSUMER DISC
2.73% XLF SELECT STR FINANCIAL SE
2.70% XLE ENERGY SELECT SECTOR SP
2.45% XLV SELECT SECTOR HEALTH CA
1.70% XLP SPDR FUND CONSUMER STAP
0.91% XLK TECHNOLOGY SELECT SECTO
Wed May 09 00:00:00 EDT 2012 SPY was down -3.15% in 10 days, sector performance 10 days later
0.22% XLU SELECT SECTOR UTI SELEC
0.11% XLP SPDR FUND CONSUMER STAP
-0.76% XLV SELECT SECTOR HEALTH CA
-1.48% XLI SELECT SECTOR INDUSTRIA
-1.87% XLY SPDR FUND CONSUMER DISC
-3.09% XLB SPDR FUND MATERIALS SEL
-3.12% XLE ENERGY SELECT SECTOR SP
-3.32% XLK TECHNOLOGY SELECT SECTO
-5.69% XLF SELECT STR FINANCIAL SE
Wed Nov 14 00:00:00 EST 2012 SPY was down -4.83% in 10 days, sector performance 10 days later
5.83% XLY SPDR FUND CONSUMER DISC
5.38% XLP SPDR FUND CONSUMER STAP
5.17% XLB SPDR FUND MATERIALS SEL
4.87% XLK TECHNOLOGY SELECT SECTO
4.84% XLI SELECT SECTOR INDUSTRIA
4.06% XLF SELECT STR FINANCIAL SE
3.84% XLV SELECT SECTOR HEALTH CA
3.65% XLE ENERGY SELECT SECTOR SP
3.07% XLU SELECT SECTOR UTI SELEC
Thu Jun 20 00:00:00 EDT 2013 SPY was down -3.27% in 10 days, sector performance 10 days later
5.80% XLY SPDR FUND CONSUMER DISC
4.11% XLF SELECT STR FINANCIAL SE
3.21% XLP SPDR FUND CONSUMER STAP
3.08% XLV SELECT SECTOR HEALTH CA
2.71% XLU SELECT SECTOR UTI SELEC
2.63% XLE ENERGY SELECT SECTOR SP
2.17% XLI SELECT SECTOR INDUSTRIA
1.00% XLK TECHNOLOGY SELECT SECTO
-0.71% XLB SPDR FUND MATERIALS SEL
Wed Aug 21 00:00:00 EDT 2013 SPY was down -3.08% in 10 days, sector performance 10 days later
3.61% XLE ENERGY SELECT SECTOR SP
1.75% XLB SPDR FUND MATERIALS SEL
1.74% XLV SELECT SECTOR HEALTH CA
1.24% XLY SPDR FUND CONSUMER DISC
0.78% XLI SELECT SECTOR INDUSTRIA
0.22% XLK TECHNOLOGY SELECT SECTO
-0.05% XLF SELECT STR FINANCIAL SE
-0.10% XLP SPDR FUND CONSUMER STAP
-0.43% XLU SELECT SECTOR UTI SELEC
Wed Jan 29 00:00:00 EST 2014 SPY was down -3.95% in 10 days, sector performance 10 days later
4.89% XLK TECHNOLOGY SELECT SECTO
4.79% XLU SELECT SECTOR UTI SELEC
4.61% XLV SELECT SECTOR HEALTH CA
3.69% XLB SPDR FUND MATERIALS SEL
3.36% XLY SPDR FUND CONSUMER DISC
2.85% XLF SELECT STR FINANCIAL SE
2.51% XLI SELECT SECTOR INDUSTRIA
1.71% XLP SPDR FUND CONSUMER STAP
0.85% XLE ENERGY SELECT SECTOR SP
Tue Aug 05 00:00:00 EDT 2014 SPY was down -3.33% in 10 days, sector performance 10 days later
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Trading the Swing Portfolios and Swing Picks

Update: While this post is still accurate in its description of the Swing Portfolio and Picks, a new post titled How To Get a 70% win ratio trading StockMarketsVane’s Swing Picks was written a few weeks after this post and describes in detail a strategy to select and trade the swing picks.

This website offers various portfolios based on proprietary trading systems, while some systems are for long term holding periods (Trend portfolios), others are trying to capture a short term up swing and the positions are to be held 4-5 days (Swing and All-Weather Portfolios). The goal is not to make 100% on a few big winners but to make many 2-4% profits 60% to 75% of the time. For example, the US Swing portfolio has a 68% transaction win rate over a 10 years period.

This post will attempt to describe some facets of the Swing Portfolios (and All-Weather Portfolio which trades using similar algorithms as the Swing Portfolios)  in order to help applying trading ideas offered by these portfolios.

Stock Selection

One of the most important part of these trading systems is choosing the stocks to trade. At the end of every trading day, all stocks are scanned and filtered based on minimum volume, stock price and specific indicators such as relative strength, volatility, trend and past algorithm performance. If that filtered list contains a stock that is oversold on a short term basis in a pattern that was successful in the past for that specific stock, a BUY order is issued. SELL orders are using the same identification patterns but in the opposite direction.

The Basics

Trading the ideas to match the performance of my trading systems is very easy:

Entering a position based on a portfolio pending order:

  1. In the evening, write down the BUY pending orders to execute from each portfolios available here.
  2. The next day, execute the orders just before the market closes.

Exiting positions managed by a swing portfolio :

  1. Write down the SELL pending orders to execute from each portfolios
  2. The next day, execute the orders just before the market closes.

That’s it. But learning details on how my system works could help you beat it.

What are we trying to do?

A good stock for this system is identified, then it pulls back for a few days, that’s when we buy it in the hopes or selling it in a few days with a small profit. Here is a typical move that the swing systems  try to capture, the green dot is the buy signal and the red dot is the sell signal, both signals are on the execution day,  communicated the day before:

cva

How to get better returns?

The swing systems presented on this site have only one price per day where they can execute an order, the closing price. A human being has all day long to pick the best time to enter or exit a position, getting a good entry can make a good stock pick become a great one.

Passing on a trade

It is important to note that since the orders are executed at the end of the next trading day, a diligent trader has the opportunity to analyze the current day data to enter earlier or not at all, I’ve intentionally kept my system unconditional on the day of the trade to keep it simpler, it doesn’t mean that you cannot add to it.

For example, if on the day you are supposed to buy the stock, it spikes up above the previous days high, you might want to skip the trade altogether since the short term up move was probably missed:

hpq

One exception to this is if the upswing comes with an above average volume and you think it could be lasting a few days, getting in the trade might be worth it:

mw

Some winners, some losers

If the stock continues to go down in the following days after you bought it it might be because:

  1. The pull back is not over and can continue for a few days before swinging up ending in a winning trade (very frequent).
  2. The move is actually a trend reversal instead of the expected temporary pull-back, in that case, the system has built in stops that will exit when triggered.
  3. The stock is just going sideways interminably (be patient or sell and move on!).

Swing Stock Picks

In addition to the daily portfolio updates, I also post daily Swing and Trend Buy/Short ideas in the “More Stock Picks” section. Trading these ideas is similar to following one of the portfolios but it requires more work on the sell side.

Entering a position based on a swing stock pick:

  1. In the evening, write down the BUY order to execute.
  2. The next day, execute the orders just before the market closes.

Exiting positions entered from a swing stock pick :

  1. As soon as you enter the position, set a real or mental stop, be sure it is not too aggressive and be disciplined when it triggers! I often use a multiple of the ATR value of the stock (3, 4 or 5 depending of volatility) or a fixed %.  And most important, set a target that should trigger a sell, I often use a moving target adjusted daily, if the stock today reaches a 5 to 7 days high, sell during the next day. The swing positions are held on average only 5 days.
  2. Every day review your open positions to see if your stops or your target have been reached, and write down the sell orders to execute the next day.

More ups than downs

Following a trading system can be very hard, you need lots of discipline and overriding it is rarely the best option so do it with caution. After a few loosing trades you should always keep in mind that overall the system should end up with more wins. If not, it’s time to go back to the drawing board!

 

 

 

 

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Portfolio changes and more!

Sorry for the lack of updates in the past weeks, I have been busy. I am in the process of updating the site for some portfolio changes!

The Canadian version of the All Weather Portfolio is being deprecated. Leveraged canadian ETFs have very low volume and I get better results with 3x ETFs which seem to be non-existent in the canadian market.

The US All Weather Portfolio is getting a total makeover, it is now a high risk / reward experimental portfolio with fluctuating position sizing in order to maximize returns.

I have also stopped trading a few leveraged ETFs like Oil and Gas as I couldn’t get the edges I saw in other ETFs such as SPY, you can see the new list of leveraged ETFs traded in the US All Weather  on the Portfolios page.

I am also introducing a new stock picks section which should provide daily interesting trade ideas.

Expect the changes to appear tonight when the current positions page gets updated.

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The Random Stock Portfolio – Part 2: Short Term Edges

In this post, I would like to explore how short term edges can be applied to the random stock portfolio. Many short term edges try to capitalize on buying an oversold security just before it springs back up, you can add more filters to get better quality stocks and less volatility but I will try  to keep the tests as simple as possible.

Note that in the first post the starting capital was 10,000$ for all simulations and the commission cost was 5$. When trading this small with a 5$ transaction cost, short term edges are really hard to realize so I have upped the starting capital and doubled the commission which is in-line with what my broker is charging me. Never forget the costs associated to all transactions when testing a system!

We will start our first simulation run with a starting capital of 100,000$, for the duration of the simulation we randomly buy 10 stocks and sell them 5 days later then we do it again until the simulation is done. The commission per transaction will be set to 10$.

Here are the performance results for 100 portfolios from 1994 to 2014:

Buy Random Sell After 5 days.20140422T215958

This looks pretty random,  about half will have positive returns but nothing really impressive, this is will be our reference data.

Buy low, sell 5 days later

Now let’s try our first short term edge, what if, instead of buying stocks randomly, we buy any 10 stocks when they reach their lowest price in 7 days? That is, only buy stocks whose current price is lower than all previous 7 days and sell them 5 days later:

Buy On 7 days low, Sell after 5 days.20140422T220548

The median compound annual growth rate for our run of 100 portfolios is 35%! And the minimum growth rate is more than 26%! Of course the draw-downs are big but it does demonstrate the effectiveness of that short term edge. Or does it?

Postdictive error

The previous simulation does something wrong, if the price is the lowest in 7 days it buys the stock, see anything wrong here? We buy the stock at the closing price AFTER the markets are closed, this called a postdictive error. I still think the edge is somewhat valid if you consider that most of the time, the closing price is pretty close to the price, say, 10 minutes before the market close, so you could theoretically run your system 10 minutes before the market close and have time to execute the orders. I unfortunately do not have the data to test this assumption. So lets try to fix our error by buying the stock the next day at the close price:

Buy On 7 days low, Sell after 5 days.BUY_NEXTCLOSE.SELL_NEXTCLOSE.20140424T231346

There is still a small edge but it’s not as striking as the first one, moving the order execution a day later had a very noticeable negative effect.  What if we only bought at the next day’s close IF the next day open is down in order to capitalize the pullback and buy at the lowest price? :

Buy On 7 days low, Sell after 5 days.BUY_NEXTCLOSEIFOPENDOWN.SELL_NEXTCLOSE.20140424T231713
Much better! We still don’t have the same edge as when buying but even the lowest performing portfolio made 8% annual growth rate, not bad for randomly selected stocks filtered by a simple oversold signal.

Another idea is to add a Moving Average filter, same test as before but we buy only stocks at their lowest 7 days when the stock price is above their 100 MA:

Buy On 7 days low, Sell after 5 days on MA(100) uptrend.BUY_NEXTCLOSEIFOPENDOWN.SELL_NEXTCLOSE.20140425T222707Again, we improve significantly our result by considering another simple filter before buying the stock.

RSI(2)

Another oversold indicator is the Relative Strength Index with an aggressive value of 2, buy when the RSI is oversold with a value below 15 and sell when it’s overbought with a value of 85, like the last test, we only bought at the next day’s close IF the next day open is down when the price is above the 100 MA :

Buy when RSI(2) below15, Sell after RSI(2) above85  on MA(100) uptrend.BUY_NEXTCLOSEIFOPENDOWN.SELL_NEXTCLOSE.20140425T233639There are many more short term edges that are worth studying, I hope you found the ones presented here interesting. I’m always looking for new edges to test so let me know if you have any to share!

In the next part of the series “The Random Stock Portfolio” I’ll try to look at the performance of longer term edges, stay tuned!

 

 

 

 

 

 

 

 

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The Random Stock Portfolio – Part 1

A few weeks ago I had this idea of building a framework for testing portfolios. These portfolios would buy stocks randomly and I would be able to introduce simple trading rules to them and see their effects on a wide range of securities, for a long period of time. I thought I could post about it the next evening but I was a bit of a fool, this stuff is very interesting and I have only scratched the surface of it, this is the first post of many (I hope) exploring how basic trading rules can affect the random portfolios.

Let’s go back 20 years, and create one hundred portfolios, each portfolio will follow the same rules:

  • Portfolio starting capital is 10000$ and each transaction will cost 5$.
  • Select randomly 10 stocks to buy, each stock must have more than 750000 average daily volume and a minimum stock price of 3$ (I know it’s not totally random but I’m only interested in liquid stocks with decent capitalization at the time they are bought!)
  • The sample includes NYSE and NASDAQ markets from 1994 to 2014.

All images in this post include 3 charts, the top chart contains the combined performance of all the portfolios, the lower left chart shows the distribution of the compounded annual growth rate for all portfolios and the lower left chart include the distribution of the draw downs of each portfolios.

First test, totally (mostly) random: Buy randomly any stock, then every trading day, for each positions, roll a 20 sided dice, if it falls on 1, sell the stock and buy another one randomly (5% chance of selling the stocks every day):

Buy Random Sell 5pct.20140316T200352

More than 81% would have been wiped out (In that context, wiped out means that they went from 10000$ to below 1000$).  Only 10% would have broken even.

What if we just bought 10 stocks randomly in 1994 and never sold them, if a stock we bought is no longer being traded, sell it with the last available price and buy a new one randomly :

Buy Random Sell Never.20140316T200018

More than 50% of the portfolios end up with an annualized return of 8.5%, that means more than half would have seen their 10000$ grow to more than 50000$ in 20 years! Even if there are portfolios having huge draw downs, it does show that “buy and hold” has some merits if you stay invested in ANY stocks. The portfolio with 3.76% annual growth rate is the worse one, slightly doubling its initial 10k investment in 20 years, not bad for randomly selected stocks!

Let’s try to put trailing stops and only sell a stock when the trailing stop is hit, the next 5 images contain the results for 1%, 5%, 8%, 15% and 20% trailing stops on randomly bought stocks:

Buy Random Sell On Trailing 1.00pct.20140318T000215

Buy Random Sell On Trailing 5.00pct.20140318T000719Buy Random Sell On Trailing 8.00pct.20140318T001318

Buy Random Sell On Trailing 15.00pct.20140317T235405Buy Random Sell On Trailing 20.00pct.20140317T235237Many books and traders recommend having a 7% or 8% trailing stop, this test shows that maybe that value is too aggressive,  or at least it cannot be applied to ANY stocks, some volatility values should probably be used to make sure that stocks we take positions in are not too volatile.

Having trailing stops based on a stock percentage value seem to have a negative effect when set to values below 12% and a negligible effect when set above 12%, to the point where I find them a bit useless, if not dangerous.

Let’s try to refine our “sell” strategy and have a stop based on the trailing ATR value of the stock instead of a percentage, if the stock is 10$ with an ATR value of 0.10$, we set our stop at 9.90$, if we sell, we re-buy randomly any stock the same day, every day we adjust our stop to the highest value between the old stop and the new stop generated from today’s ATR value :

Buy Random Sell On Trailing ATR(14) x 1.00.20140316T200716Ouch! That Stop might be too aggressive, I tried many multiple increments and the best value I came up with is a 5 to 8 times the ATR value so for a stock is 10$ with an ATR value of 0.10$, we set our stop at 9.20$ when we want 8 times the ATR value (10$ – 0.10$ *8 = 9.20$) :

Buy Random Sell On Trailing ATR(14) x 8.00.20140319T223309

None of the portfolios have wiped out, all of them broke even, and more than half had annualized returns of more than 9.37%, not bad.  The big 86% draw down was a bit of a let down so I took a look at the actual trades and trailing stop values, using a 8% trailing stop is fine for some stock but for others  it can represent more than the actual stock price! To work around that, I introduced a NATR buying filter which allows for the selection of less volatile stocks. Here are the results when buying only stocks with a NATR value of less than 3%:

Buy Random Sell On Trailing ATR(14) x 8.00 natrMax=3.00pct.20140316T201328

In all runs the NATR value limitation reduced the drawdown significantly with a small negative effect on the total returns.

Stay tuned for part 2 where I’ll try to make the random portfolio even less random by trying different rules for buying and selling as well as some concepts used in my own portfolios, if you have any basic trading ideas you would like to see tested in this framework let me know and I’ll try to add them as well!

Some ideas I would like to try:

  • Buying after consecutive down/up days
  • Buying trending stocks
  • Buying market out-performers
  • Following market wide signals
  • Various common technical signals
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Trend And Swing Portfolio Reset

Why a reset?

Today, on the first trading day of march, I’ve decided to reset the Trend and Swing Portfolios because in the past few months I have made significant changes to the algorithms and I want the back-test results to match the new changes. Here is a brief list of on going changes that were made since November 2013:

  • All Portfolios now behave better in out of sample periods which should make them more consistent in the future.
  • Trend Portfolios now buy on a price pullback like the Swing Portfolios but they stay long until the trailing stop is hit.
  • Both Swing and Trend Portfolios now check for correlation before buying another stock to improve diversification. Note that the parameters are a bit lax so it is still possible to have a many stocks in one sector.
  • Both Swing and Trend Portfolios now have a volatility criteria. If a stock is not volatile enough or too volatile,  it will be ignored.

Looking back

Here is a recap of the first “live” 6 months performance of the Swing and Trend portfolios, I am very happy with the results even if I fully realize we are in a big bull market (up to February 2014 at least!) and there were a few bad trades in the CAD Swing portfolio.

Live Performance from August 23rd 2013 to Febuary 28th 2014:

  • US Trend: 58.4%
  • CAD Trend: 30%
  • US Swing: 25.4%
  • CAD Swing: -4.6%

For the same Period SP 500 returned about 11%.

I have created an archive to preserve that time period here.

The Future

I’m not sure how the stock markets will behave for the rest of 2014 but I think it will be more volatile and less bullish,  but I hope the improvements done to my systems will compensate for it. For example, the annual growth rate of the US Trend Portfolio jumped from 18.9% to more than 27% while reducing the draw down to 20% from 22% for the past 10 years period.

Note that many positions tracked by the Portfolios last week will have disappeared, this is  expected  since the time line of all portfolios will be reset and buying rules were changed.

 

 

 

 

 

 

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A Tool For Building An Index Portfolio

When building the Enhanced Index Portfolios I tried to come up with diversified ETFs with little correlations between each other, I also had to keep in mind the “Enhanced” part of the portfolio which might tip the diversity scale a bit when adjusting the asset allocation each months based on each ETF performance. In order to help me do this I built a simple table of all ETFs with useful technical information in sortable columns such as Yield, Compound Annual Growth Rate… I then started back-testing with traditional index investing first and then the enhanced index investing, I wanted the ETF selection to perform well with both approach. I am happy with the result, the traditional index investing gives a very respectable annual growth rate of 9.2% and the enhanced version 11.96% over the last 10 years.

Weeks after doing that exercise I often re-generated the table for reference because I think it can show ETF information in different interesting ways, so I’ve decided to make it available and I hope you will find it useful too! It will be permanently available on the top of the site by clicking on ETF Tool.

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Are you a Stock Groupie?

First Sighting
When I started this blog with portfolios managed by automated trading systems I thought it would be interesting to post each orders daily on StockTwits and Twitter. And it is, I very much enjoy it, I get some very interesting feedback from other fellow traders. There is one thing I did not anticipate however: The Stock Groupie!

groupie

Identification
The Stock Groupie will usually not manifest himself when I post BUY orders, sometimes I get “likes” or people agreeing with the BUY order, that does not make one a groupie, this is the typical positive fellow trader commenting, it’s all good.

Aggressive Behavior
The Stock Groupie will come out of his lair only when the SELL order is posted. This is when he starts looking for blood; “You are dumb!”, “A traitor!”, “Wrong, so wrong!”, “Time will show you how wrong you are!”, “This stock is the best investment ever what a mistake you are making!”.

groupie2

Characteristics
When that happens, I actually feel sad for the Stock Groupie because I think that being so emotionally linked to a stock can bring mostly loss and despair. Here are some common traits I think most Stock Groupies are afflicted with, if you have more than 3, you should get yourself checked!

  • You have a unhealthy allocation in one stock in particular.
  • Most likely a Bio Pharma or Tech stock.
  • You are convinced this is your 10 bagger stock.
  • You know all posters of all message boards talking about this stock (and you’re a major contributor!).
  • You “feel” it will go up anytime now, a matter of hours or days.
  • You have been holding on a loosing trade for weeks or months.
  • You think random tweets from strangers can influence the stock price in a big negative way
  • You over-think every news that come out about the stock instead of looking at the actual price action.

Cure
The cure is very simple but hard to swallow: Sell the stock and move on!

Let me know if you can think of more Stock Groupie traits, with your help we might heal them all!

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Portfolio format update

Starting today, a revamped daily portfolio update process will be put in place, featuring these changes:

  • The Markets Vane top section is gone, it was not very useful to start with.
  • All updates will now be pushed to a static page named “Current Positions” in the menu below the site logo instead of a new blog post every day to avoid cluttering the “normal” blog posts, I will also remove the automated posts.
  • All updates now feature a pie chart for showing the real allocation of each holdings.

I am still not completely happy with the new look so more changes will probably be done in the coming weeks, as always, feedback is welcome!

 

 

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